In the 12 months since U.S. President Donald Trump stood in the Rose Garden and declared “reciprocal tariffs” against more than 50 countries, the global economy has done something most economists did not expect: it adapted, rerouted, and — in significant ways — kept growing. The counterintuitive verdict from McKinsey Global Institute’s March 2026 report, “Geopolitics and the Geometry of Global Trade,” is that the tariff war did not kill global trade. Both U.S. imports and Chinese exports hit all-time highs in 2025. Trade dynamics reshuffled. The biggest driver of that resilience was not diplomacy. It was artificial intelligence.
AI-related goods and services have become the single most powerful engine of modern trade growth. Investment in AI infrastructure — data centers, semiconductors, advanced manufacturing equipment, and related components — has surged to levels that offset the drag from tariff-reduced commerce between the United States and China. That bilateral trade fell roughly 30 percent. But U.S. imports overall rose by approximately $150 billion, driven largely by AI-linked purchases unrelated to tariffs. Chinese exports pivoted to new markets and cut average consumer goods prices by 8 percent to compete. China effectively became, as McKinsey describes it, “a factory to the factories,” ramping up industrial components and capital goods for emerging economies globally.
For the United States, the gap between political promise and statistical reality remains stark. Despite the tariff offensive, there is limited evidence of a domestic manufacturing revival. The National Industry Classification System manufacturing index held at similar levels in the second half of 2025 compared with the second half of 2024. U.S. manufacturing employment figures showed no material increase in jobs — the metric Trump most frequently cited to justify the tariff policy.
Meanwhile, the European Union faces what McKinsey terms a “double squeeze.” The EU’s trade deficit with China has widened. Chinese electric vehicles flooded European markets, rising roughly 50 percent to more than 800,000 vehicles in 2025. EU car exports to the United States fell 17 percent while exports to China dropped over 30 percent. Germany, Europe’s industrial heartland, imported more cars from China than it exported there for the first time in its history.
The nations that benefited most sit in Southeast Asia. ASEAN economies increased trade with both the United States and China, capitalizing on the rerouting of supply chains. Countries like Vietnam, Malaysia, and Indonesia captured manufacturing capacity that previously ran through Chinese and American factories. That structural shift looks durable, not temporary.
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In February 2026, the U.S. Supreme Court struck down the legal basis for many tariffs introduced in 2025 under the International Emergency Economic Powers Act, prompting the White House to pursue alternative trade enforcement authorities. The ruling lowered effective tariff rates but created new uncertainty about the durability of existing policy. Oxford Economics forecasts global trade volume growth of just 1.2 percent in 2026, down from 3.8 percent in 2025 — a sharp deceleration that reflects the tariff drag combining with an AI investment boom that, while powerful, remains concentrated in a narrow band of high-tech sectors.
HSBC’s global research division warns that the concentration of trade growth in AI-linked sectors creates downside risk if investment momentum falters. As of early 2026, total AI-related revenues globally amount to approximately $50 billion per year — roughly one-eighth of Apple’s or Alphabet’s annual revenues. The gap between investment and return is vast. When investors demand accountability for that gap, the market correction could be sharp. The world’s trade architecture is being rebuilt around artificial intelligence. How stable that architecture proves to be is the defining economic question of the decade.
