Global trade at risk as US-China tensions rise post-US elections

Source: David Vives via Unsplash

Trade growth impact and export risks

A renewed but contained trade war could bring nominal global trade growth below 5% in 2026 (-0.6pp), with $67bn 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 $17bn per year for the US. Over the past two years, bilateral trade flows between geopolitically close countries have jumped by $620bn and now account for 60% of global trade.

Emerging trade hubs and SA’s position

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). However, South Africa is projected to face export losses totalling $1bn over the 2025-2026 period if current trade policies remain unchanged, according to Allianz Trade.

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.

In a more severe scenario involving increased US tariffs and retaliatory measures, South Africa could face export losses amounting to $4 billion over the same period.

“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 totalling close to $217bn over 2025-26. But this scenario looks unlikely as the US would also have to face a large cost,” says Ana Boata, head of economic research at Allianz Trade.

Global trade realignment

Global trade is increasingly being shaped by the competing geoeconomic agendas of the US and China. US imports have been breaking away from China, while China has been exporting more to its geopolitically close partners, such as Russia, Singapore, Vietnam, the UAE, and Saudi Arabia.

“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 protecting 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.

EU’s challenges amid US-China trade tensions

The EU faces challenges despite its alignment with the US on geopolitical issues. According to Allianz Trade, past tariffs imposed on China cost the US USD17bn per year (4% of its Chinese imports), but they cost the EU almost $38bn per year (6.4% of its Chinese imports).

The complexity of global trade flows has doubled since 2017, with next-generation trade hubs like Vietnam, Malaysia, Indonesia, and the UAE stepping up. Allianz Trade expects these hubs to grow their share of global exports by +1.6pp over the next five years, reaching USD1 274bn.

“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 $120bn 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 geoeconomic order

Allianz Trade’s geoeconomic distance 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.

“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 Huang.