One year since ‘Liberation Day’: What did Trump’s tariffs actually do?

It’s been exactly one year since the so-called ‘Liberation Day’, when US President Donald Trump shocked global markets by declaring that the US would be pursuing its “economic independence.” What followed was one of the most disruptive trade policies in recent history, with tariffs defining US economic policy – and global trade as a whole – for the year afterwards. 

Through enacting the International Emergency Economic Powers Act (IEEPA), Trump imposed a baseline of 10% duties on all US imports. Tariffs are essentially taxes placed on imported goods and, according to Trump, were supposed to encourage customers to buy American goods, while boosting domestic manufacturing and creating new jobs. 

85 countries with a trade surplus with the US were subject to anywhere from 11% to 50% of ‘reciprocal tariffs’. Countries with the largest trade surpluses were labelled the “dirty 15.” This included Cambodia, Vietnam, and Malaysia, all of which are countries that are emerging as central to US trade, as the superpower moves away from China. 

China, with whom the US had its highest trade deficit by far – $295.40 billion in 2025 – experienced, at its highest, a tariff of 145% on its exports to the US. 

Uncertainty became the basic condition for most countries. Some of them proposed retaliatory tariffs, and certain tariff rates, including that between China and the US, were to be determined through bilateral tariff negotiations, which lasted for months after Liberation Day. 

Since Liberation Day, the US’ total trade deficit has narrowed, dropping from around $136 billion in March 2025 to nearly $54 billion in January 2026, driven by a surge in exports simultaneously to import constraints. But this target came at the expense of consumers, who absorbed approximately one-third of the associated costs. 

But is the apparent drop in the US’ trade deficit actually evidence of a meaningful shift in its economy? And has Trump’s tariff terror led to a tangible shift in global trade flows?

A loss at home

Ultimately, for the US economy, prices rose and hiring dropped, while intent to reshore didn’t materialise.

According to JP Morgan, in spite of Trump’s promise of increased jobs, hiring plans fell to their lowest since 2009. The number of new jobs announced in 2025 was under 205,000, which reflects a 58% decrease from the previous year. This suggests that tariff-related uncertainty may have driven a paralysis of labour demand, with firms prioritising stability over expansion. 

A KPMG survey of 300 senior executives found that about 60% of US businesses were considering reshoring production, but only one in 10 had started. The survey cited higher labour costs (65%), higher operating expenses (61%), and capital investment needs (46%) as the primary barriers. 

Structural constraints to moving manufacturing prevented reshoring, reflecting a gap between political ambition and economic reality, where cost structures continue to anchor production abroad.

For Rebecca Harding, CEO of Centre for Economic Security, “The US’s role in the global economy is now one of a disruptor.” Highlighting the consistent ‘America First’ agenda of the first and second Trump administrations, as well as the Biden administration, 

“This isn’t necessarily new,” she said. “However, what is new now is the willingness of the US administration to recalibrate the global geoeconomic system on its terms at whatever price.”

The practical implications of a more fragmented, multipolar global trade ecosystem can be seen in how businesses reoriented their operations. Take contracts: companies were prompted to  “cautiously shift from long-term contracts to shorter, flexible contracts with diversified suppliers and stronger exit clauses,” Priyanka Bhatt, Legal Knowledge Engineer at Agiloft, told Trade Finance Global (TFG). 

Supply chain reconfiguration amid uncertainty

“Liberation Day tariffs were a declaration that the international rules-based order that we had taken for granted in the West was no longer something that the US considered useful for the American economy,” said Harding. 

“It was a declaration of economic war against the system, in the same way that China and Russia had also declared it inappropriate for the BRICS nations at the Kazan summit the year before.”

Trump’s policy created a climate of unpredictability and precarity, where outcomes became dependent on ongoing negotiations, and firms had to anxiously await the fate of their supply chains. During this period of uncertainty, many resorted to moving their supply chains to countries with lower trade policy uncertainty (TPU).

TPU refers to the gap between announced tariffs and the 10% baseline. Countries such as Vietnam, which was subject to a threatened tariff of 46%, had a very different experience from the ‘10% countries’, like the UK. And firm behaviour was ultimately driven by this difference.

According to research by Munich-based economic research network CESifo, a 10% increase in potential tariffs led to a 17% increase in imports from countries with low TPU, and a 17% decrease in imports from countries with high TPU. “Imports were like water, flowing from high-tariff countries to low-tariff countries,” said economist and researcher Haishi Li.

The value of goods imported to the US in 2025 stood at $357.6 billion, up 3.6% from the previous year, unexpectedly, given the increased cost of importing. 

It’s crucial to recognise that supply chain rewiring comes with costs of its own. In the thick of the COVID-19 Pandemic, a 2020 report by Bank of America predicted that reconfiguring supply chains would lead to a massive capital expenditure cycle, estimated to be around $1 trillion over a five-year period. 

Producers had to face the reality that switching from familiar to new sourcing is a costly process. The impact was particularly stark for: 

• inventory-intensive firms, which have to deal with the risk of restocking under tariffs; 
• contract-dependent firms, which tend to be locked into certain suppliers; and 
• trade finance-reliant firms, which have to grapple with higher borrowing costs.

On top of this, Bhatt emphasised, “half of the US companies we surveyed changed or exited suppliers, while more than half entered new partnerships, increasing renegotiations and onboarding requirements.”

In effect, Liberation Day triggered a costly global reshuffling of supply chains, before tariffs were even fully implemented.

Moving away from China

The tariff-driven reshuffling largely worked to move the US away from China. Between April and July 2025, US imports from China were $66 billion less than those during the same period in previous years. A McKinsey report highlights how trade between the two countries dropped by around 30%.

This triggered the rise of alternative hubs. The Association of Southeast Asian Nations (ASEAN) exports to the US grew by nearly 14%, as supply chains were rerouted from China to other countries such as Vietnam, Thailand, and Malaysia. From Taiwan alone, the US recorded an additional $34 billion in imports, just from April to July 2025. 

While the US’ trade deficit with China fell, its deficits with Vietnam and Taiwan grew. In 2025, the US’ goods trade deficit with Taiwan was $146.8 billion, revealing a 99.1% increase from the previous year’s $73 billion.

The US’ trade deficit didn’t disappear; it was geographically redistributed.

The rise of South-South trade

Instead of pushing worldwide protectionism, the tariffs accelerated a shift toward cooperation among countries in the Global South. China, shunned by the US, turned to South-East Asia as a major destination for its exports. The country reached a record trade surplus of $1.22 trillion.

Chinese trade with ASEAN was not the sole result of tariffs. According to the Chinese government, Chinese trade with ASEAN reached almost $1.3 trillion in 2024, reflecting an over 50% increase year-on-year. Rather, Trump’s tariff policy amplified and kindled a nascent trend. Look no further than currency: the renminbi is now dethroning the dollar as the dominant currency for cross-border trade in the region. 

In July 2025, India and Brazil also released a joint statement on their commitment to strengthening their bilateral ties. Meanwhile, the BRICS bloc (Brazil, Russia, India, China, and South Africa), joined by Saudi Arabia, Egypt, and the UAE, championed multilateralism, with the BRICS calling for a united front against economic pressures. 

“There is strong evidence that the so-called Global South nations are working more closely together to create new payment systems, new supply chains, and new routes into Europe,” emphasised Harding. 

“Trade itself has been surprisingly resilient overall, but there are a lot of changing supply chains that mean that it is in no sense the same as it was before.”

The legal repercussions 

IEEPA, first used by former US President Jimmy Carter as a response to the 1977 Iran Hostage crisis, provides the president with sweeping powers to regulate economic conditions amid a period of national emergency.

On 20 February 2026, the US Supreme Court ruled Trump’s use of tariffs unconstitutional, citing: the statute doesn’t authorise tariff-use, the president lacks the authority to tax, and the power to tax and impose tariffs lies with the US Congress.

The US made an estimated $175 billion in revenue from the IEEPA tariffs, reported Reuters, following the Supreme Court ruling. Since the decision that the tariffs under IEEPA were unlawful, businesses have been suing the US government for reimbursement. 

As Sumeet Malhotra, Partner at Watson Farley & Williams, told TFG, remedies would be narrow and technical in nature, confined to importers of record, and limited to recovering duties plus interest through claims or litigation. These remedies would also be subject to time limits and tied to specific transactions, thereby capping overall exposure.

“There is no downstream consumer recovery, and no basis for wholesale repayment of tariff revenues,” he said.

Since the Supreme Court ruling, Trump hasn’t given up. Proving his commitment to tariffs – “the most beautiful word in the dictionary” – he turned to another legal mechanism: Section 122 of the Trade Act of 1974. 

Section 122 is designed to tackle a balance-of-payments deficit crisis (which is different to the previously highlighted trade deficit crisis) and allows for a blanket tariff of a maximum 15%. These tariffs are limited to 150 days – set to expire in July 2026, unless voted to be extended by Congress. 

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The last year has seen hysteria and hyperopia as a result. In reality, taking a myopic, immediate, short-sighted view, global trade has not changed seismically. Global networks are shifting slowly, and the more permanent effect of these price rises remains to be seen.

For US sellers, reliant on international imports, the rug has been pulled out from under them – international supply has been cut off, while domestic production has not been adequately subsidised. For international suppliers, demand from the US has grown unreliable, resulting in bankruptcies. One man’s hysteria can cost another’s livelihood.

International trade agreements since Liberation Day: 

• India-European Union (EU) Free Trade Agreement (FTA)
• UK-India FTA 
• EU-Australia FTA 
• Thailand-Bhutan FTA
• EU-Mercosur trade agreement
• UK-Brazil strategic partnership
• EU-Mexico trade deal
• Canada-Indonesia Comprehensive Economic Partnership Agreement 
• China’s zero-tariff policy for 53 African states (starting May 2026)
• China-Kenya “early harvest” Economic Partnership Agreement
• Ghana-Colombia maritime connectivity deal

Selected 2026 revisions to the Harmonized Tariff Schedule of the United States:

• General Note 16: African Growth and Opportunity Act (AGOA)
  • Specific sub-Saharan African countries eligible under AGOA are granted preferential tariff treatment for qualifying exports to the US, if produced in eligible countries and meeting a 35% value-added requirement.
• General Note 17: United States-Caribbean Basin Trade Partnership Act (CBTPA) of 2000
  • Duty-free or reduced tariff treatment is granted to eligible goods from designated Caribbean countries. The program remains in effect for qualifying countries and goods through September 30, 2030 (or until replaced by a broader trade agreement).
• General Note 18: United States-Jordan Free Trade Area Implementation Act
  • Preferential tariff treatment is granted to goods produced wholly or sufficiently in Jordan. Generally, at least 35% regional value content is required. Detailed and stricter rules surround textiles and apparel.
• General Note 25: United States-Singapore Free Trade Agreement
  • Preferential tariff treatment is granted to goods originating in Singapore. The Note provides elaborate detail around garment manufacturing and cloth origination in particular.
• General Note 26: United States-Chile Free Trade Agreement
  • Preferential tariff treatment is granted to goods originating in Singapore. The Note focuses on garment manufacturing and textiles, as well as metals. 
• General Note 27: United States-Morocco Free Trade Agreement Implementation Act
  • Preferential tariff treatment for goods traded between the US and Mexico. The Note defines how to calculate material value and outlines special provisions (e.g. for textiles, indirect materials, and packaging).
• General Note 28: United States-Australia Free Trade Agreement Implementation Act
  • Preferential tariff treatment is granted to goods originating in Australia. Goods “wholly obtained” in Australia include natural resources and agricultural products, and sectors highlighted in the Note include automotive products, accessories, and packaging. Around fungible goods, the Note makes specifications on inventory management methods. 
• General Note 29: Dominican Republic-Central America-United States Free Trade Agreement Implementation Act
  • Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua are granted preferential treatment, provided certain rules/ conditions are met. Special provisions address sectors like textiles, agriculture, and automotive goods. The Act also sets requirements for claiming benefits, including certification, record-keeping, and verification by customs authorities to ensure compliance.
• General Note 30:  United States-Bahrain Free Trade Agreement Implementation Act
  • Preferential tariff treatment is granted to goods originating in Bahrain. It covers materials, production processes, and includes special rules for sectors like textiles.
• General Note 31: United States-Oman Free Trade Agreement Implementation Act
  • Preferential tariff treatment is granted to goods originating in Oman. Changes to US-Oman trade include products like sweetened cocoa powder (which now must be checked to not contain non-originating sugar) or concentrated juices (which have updates which on vitamins or minerals must be included).
• General Note 32: United States-Peru Trade Promotion Agreement Implementation Act
  • Preferential tariff treatment is granted to certain goods originating in Peru. Textiles take a focus, but also dairy, fruits and vegetables, and pharmaceuticals.
• General Note 33: United States-Korea Free Trade Agreement
  • Preferential tariff treatment is granted to goods originating in Korea. The focus here is on automotive goods, which qualify as originating if they meet regional value content (RVC) requirements. These goods include specified engines, parts, and motor vehicles under tariff headings such as 8407–8409 and 8701–8708.
• General Note 34: United States-Colombia Trade Promotion Agreement
  • Preferential tariff treatment is granted to certain goods originating in Colombia. Textile and apparel articles take focus.
• General Note 35: United States-Panama Trade Promotion Agreement
  • Preferential tariff treatment is granted to certain goods originating in Panama. Aside from textiles, the Note makes provisions around transhipment and marine life.
• General Note 36: Trade Agreement between the United States and Japan
  • Preferential tariff treatment is granted to goods originating in Korea. The Note focuses on how importers can claim these benefits, rather than on the goods themselves – not much has changed from the current US-Japan trade agreements in this update.