Quick look
- A renewed but contained trade war could bring nominal global trade growth below 5% in 2026 (-0.6pp), with USD67bn of exports at risk in Europe and China in 2025-26 (half of the global total).
- Past tariffs on Chinese imports cost the EU USD38bn per year, compared to USD17bn per year for the US.
- Over the past two years, bilateral trade flows between geopolitically close countries have jumped by USD620bn and now account for 60% of global trade.
- The next generation of trade hubs is expected to grow its share of global exports by +1.6pp over the next five years (reaching USD 1 274bn).
- In a scenario of trade policy continuity, South Africa is expected to experience export losses amounting to USD1bn over 2025-2026.
Although global trade remains strongly intertwined with the US economy, China has emerged as a new superpower, banking on its critical role in global manufacturing and its large and rising domestic market.
Against this backdrop, rising US-China tensions are reshaping global supply chains and paving the way for new trade powerhouses, according to new research from Allianz Trade, the world leader in trade credit insurance.
Potential Impacts of US Tariff Increases on South African Exports
According to the report, South Africa’s export landscape is poised for a challenging period. In a scenario where current trade policies remain unchanged, the country is projected to face export losses totaling USD1 billion over the 2025-2026 period.
Despite these anticipated losses, South Africa’s real exports of goods and services are expected to grow by 2.3% in 2025 and 1.4% in 2026, following an expected growth of 0.6% in 2024.
This indicates a gradual recovery, albeit at a slower pace, highlighting the resilience of South Africa’s export sector amidst global economic uncertainties.
However, the report also outlines a more severe scenario that could significantly impact South Africa’s export economy.
In the event of increased tariffs from the United States, coupled with retaliatory measures, South Africa could face export losses amounting to USD4 billion over the same period. Such an extreme scenario underscores the vulnerability of South Africa’s trade-dependent economy to global trade tensions and policy shifts.
This potential downturn emphasizes the need for strategic diversification and strengthening of trade partnerships to mitigate the risks associated with volatile international trade dynamics.
Allianz Trade has been operating in South Africa since 2015 through the Allianz Commercial South Africa license, underscoring its commitment to supporting local businesses amid these global trade challenges.
Additionally, Allianz provides corporate and travel insurance in the South African market, offering comprehensive solutions to safeguard businesses and individuals against evolving risks.
Trade war reloaded as Trump returns to office
In his second term as US President, Donald Trump is likely to increase tariffs on Chinese and other strategic imports (to 25% for the former and to 5% for the rest of the world, excluding Mexico and Canada), which would decrease nominal global trade growth by -0.6pp in 2026 as most measures would kick-in from the second half of 2025.
China and the EU would bear most of the cost, with USD67bn of exports at risk in 2025-26, especially in automotive manufacturing, transport equipment and metals. Their retaliation measures are likely to hit US pharmaceuticals, automotive, metals, agrifood and machinery.
“In the event of a full-blown trade war (60% tariffs on China and 10% on the rest of the world, including Mexico and Canada), the toll would increase to 2.4pps of nominal global trade growth and China, Mexico and Canada would be hit the hardest, with cumulated export losses totaling to close to USD217bn over 2025-26. But this scenario looks unlikely as the US would also have to face a large cost,” adds Ana Boata, Head of Economic Research at Allianz Trade.
American “godfathering” vs China’s “silk” doctrine
Global trade is increasingly being shaped by the competing geoeconomic agendas of the US and China. US imports have been breaking away from China, and China has been exporting more to its own geopolitically close partners (Russia, Singapore, Vietnam, the UAE, Saudi Arabia). In this context, bilateral trade between geopolitically aligned countries has risen by +2pps (USD620bn) to 60% of global trade in just two years.
“China’s trade-and industry-centric “silk” doctrine has mostly relied on soft power and connective influence, while American “godfathering” rests on four pillars: (i) an unwavering commitment to protect core national interests at all costs, (ii) securing loyalty within the network of historical allies, (iii) an active economic and military stance against rivals and (iv) expanding American influence and control across new domains such as space, tech, and AI. No matter who wins the US elections, this clash is here to stay,” explains Ano Kuhanathan, Head of Corporate Research at Allianz Trade.
Alignment with the US is costly for the EU
While the US and the EU share a common stance on geopolitical issues, their economic interests are not aligned. Nevertheless, the EU does tend to follow suit when the US imposes tariffs on China – usually in the following year – even though it pays a higher price, according to Allianz Trade’s calculations.
Past tariffs imposed on China cost the US USD17bn per year (4% of its Chinese imports), but they cost the EU almost USD38bn per year (6.4% of its Chinese imports).
Moreover, the EU itself is not safe from US protectionist measures, and there is a risk that the US and/or China follow a divide-and-conquer strategy by exploiting internal European divisions to seek bilateral deals that would improve their own negotiating positions against the block.
New trade hubs are emerging as winners, but making global supply chains more complex
In the years to come, global trade is likely to grow below its long-term average. At the same time, Allianz Trade’s supply-chain complexity index shows that global trade flows are becoming more intricate, with complexity levels doubling since 2017 and rising 6x compared to the pandemic years.
In this context, Allianz Trade identifies 25 economies that could benefit from this new geoeconomic order, given their relatively higher competitiveness compared to China in the context of an intensified trade war from the US.
“Beyond fast-growing economies such as India, this shift has opened doors for nations like Vietnam, Malaysia, Indonesia, and the UAE to step up as next-generation trade hubs. We expect these economies to grow their share of global exports by +1.6pp over the next five years, reaching USD 1 274bn. As these hubs grow to account for up to 21.3% of all global exports by 2029, they will also need to invest USD120bn on port infrastructure alone to maintain their momentum,” adds Françoise Huang, Senior Economist for Asia Pacific and Trade at Allianz Trade.
Choosing sides in the new geoeconomic order
By looking at the next-generation trade hubs and other major economies’ geopolitical, trade and cross-border investment links with the US and China, respectively, Allianz Trade computes geoeconomic distance scores relative to both countries.
These scores show that China’s sphere of influence includes more next-generation trade hubs from the emerging world, while most of the Western bloc remains closer to the US.
Unsurprisingly, the UK is the closest country to the US followed by Ireland and the Netherlands, with Canada in 4th place and Mexico only in 28th.
Most African and Asian nations are closer to China: on average 0.5 for African nations vs 0.7 distance with the US and 0.4 for Asian nations vs 0.6 distance with the US. But after Hong Kong, Canada is the 2nd closet economy to China – managing to remain close to both superpowers.
“Australia, South Korea, and Greece are among the other nations that have managed to maintain the same distance with both the US and China. These countries are geopolitically closer to the US but retain very strong trade and investment relations with China. This position could potentially become increasingly uncomfortable and force them to pick a side, should the new geoeconomic order centered on the US-China confrontation deteriorate significantly,” explains Françoise Huang.
