The world’s tumble into a trade crisis continued at pace this week as Europe sought to fire back at US tariffs, China looked to fashion new markets and the World Trade Organisation  said geopolitical tensions would impact the year ahead.

Reports say China has moved its focus when it comes to its clothing imports away from the tariff-laden USA and into Europe where it has sought to divert much of its exports to fill its north America shortfall.

The EU has not been idle this week either as it imposed sweeping tariffs on steel imports into the single market.

EU commissioner for trade and economic security, Maroš Šefčovič said the EU steel industry is a cornerstone of Europe’s economy.

“Its health and global standing are essential to ensuring strategic autonomy, including our capabilities across many sectors, like defence and automotive,” he added. “However, global overcapacity – driven by non-market policies and practices – is threatening the long-term competitiveness of European steel.”

Šefčovič  highlighted the global overcapacity crisis is reaching “critical levels” – 602 million tonnes in 2024 are projected to grow to 721 million tonnes by 2027, five times the annual EU demand.

On top of this, third countries are closing off their markets – raising tariffs and introducing safeguards – while the EU market remains largely open and under intense import pressure.

“That is why the Commission is acting decisively, following extensive consultations with our stakeholders – this proposed Steel Regulation should help restore balance to the EU steel market,” he continued.

From June next year the EU will cut the tariff-free import quota by 47%, from 33 million tonnes to 18.3 million tonnes. It will introduce a prohibitive 50% out-of-quota tariff.

Importers must disclose where the steel was melted and poured, and the new rules will cover imports from all third countries, except EEA partners.

“We remain committed to a rules-based trade system and our global network of Free Trade Agreements, including with key steel-producing countries,” Šefčovič said. “But we must also act decisively to defend Europe’s interests.”

He concluded: “ This is a necessary, effective, yet balanced measure to protect a vital sector of our economy, support jobs, and deliver on Europe’s strategic goals.”

On Tuesday the World Trade Organization lowered its 2026 forecast for global merchandise trade volume growth to 0.5% citing expected delayed impacts from U.S. President Donald Trump’s tariffs.

It  signals a significant revision down from its previous estimate 1.8% growth two months ago.

The organisations  added overall world merchandise trade volume growth is expected to slow from 2.8% last year to 2.4% this year and 0.5% next year.

“Tariff measures are weighing on trade, even though front-loading and the suspension of many duty hikes between April and August have pushed their effects back into the latter part of this year, and especially into next year,” added WTO director-general Ngozi Okonjo-Iweala.

It paints a pretty bleak picture as the impact of tariffs and the lurch not a tit-for-tat round of tariff only looks to be gathering momentum.

Jon Guy, Editor,

Emerging Risks