[D]evolution of the International Trading System: What Comes Next?

Over the past month and into the new year, tariff measures have continued to feature prominently in U.S. trade policy, with the Administration announcing additional tariffs and officials indicating that alternative legal authorities may be available to preserve existing tariff measures, notably those imposed under IEEPA. At the same time, we are seeing notable shifts in global trade dynamics and flows, driven in part by a series of new and evolving trade agreements and strategic partnerships.

1. IEEPA Tariffs

As discussed previously [IEEPA Tariff Refunds], the Court of International Trade held that it has authority to order reliquidation, and refunds of duties unlawfully imposed—even where entries have already liquidated. This decision helpfully clarifies that refunds via litigation pathways remain viable if the Supreme Court ultimately strikes down the IEEPA tariffs.

At the same time, the Trump Administration has signalled it is prepared to re-impose tariffs under alternative authorities (including Sections 301 or 122 of the Trade Act) if IEEPA tariffs are held to be unlawful, potentially complicating the refund process.

2. Section 232 Tariffs

Semiconductors: As discussed previously [Semiconductor Tariffs], the Trump Administration imposed a targeted 25% tariff on a narrow class of high-performance AI chips (largely Nvidia and AMD chips), with possible broadening of tariffs as well as tariff offset programs to be implemented in a future Phase 2.

Wood Products:On 31 December 2025, the President issued Proclamation 11000, delaying for one additional year the scheduled Section 232 tariff increases on upholstered furniture, kitchen cabinets, and vanities. The higher rates will now take effect on 1 January 2027, rather than 2026.

3. Section 301 Tariffs

On 23 December 2025, USTR concluded its Section 301 investigation into China’s semiconductor policies. While USTR found that China engages in unfair practices that burden U.S. commerce, the Trump Administration imposed an initial tariff rate of 0%, with duties scheduled to increase from 23 June 2027 (rate TBD).

4. Other Tariffs

Iran-Related Tariffs: President Trump stated that countries doing business with Iran could face a 25% tariff on U.S. trade. These tariffs have only been informally communicated through social media posts by President Trump and have not been formally implemented.

Greenland Tariffs: President Trump announced proposed tariffs of 10% from 1 February 2026, rising to 25% from 1 June 2026, on imports from several European countries unless a deal is reached. While at the World Economic Forum in Davos, President Trump appears to have reached an understanding with European leaders; it has since been reported that tariffs are no longer expected.

5. Free Trade Agreements and Negotiations

U.S.–Taiwan Semiconductor Deal: Announced on 15 January 2026, the agreement includes $250 billion in direct Taiwanese investment and $250 billion in credit guarantees to build out the U.S. semiconductor supply chain. Preferential tariff treatment is tied directly to U.S. capacity build-out, with Section 232 relief scaled to investment levels.
U.S.–Korea Strategic Trade and Investment Deal: As of 1 November and 14 November 2025, the U.S. implemented tariff adjustments promised under the U.S.–Republic of Korea Deal (i.e., the higher of MFN or 15% for autos, timber, aircraft, and related parts).
U.S.–Switzerland–Liechtenstein Framework: Effective 14 November 2025, the U.S. revised tariffs applicable to specified goods from Switzerland and Liechtenstein to the higher of MFN or 15%, with some exemptions. The tariff adjustments remain provisional pending a final agreement by 31 March 2026.

Over the past few years, the global trade landscape has seen a marked acceleration in bilateral and multilateral agreements, reflecting both economic opportunity and geopolitical recalibration:

The U.S. has led a wave of bilateral “reciprocal trade” deals with Asia Pacific countries such as Vietnam, Thailand, Malaysia, Cambodia, Japan, and South Korea. In parallel, the Indo-Pacific Economic Framework (“IPEF”) continues to evolve, with the Supply Chain Agreement signed and negotiations progressing on digital trade, labour, and environmental standards.
China, for its part, is deepening economic integration with ASEAN through the ACFTA 3.0 upgrade, signed in October 2025. This protocol expands trade, digital cooperation, and green economy alignment—reinforcing China’s influence in Southeast Asia.
The EU concluded the EU–Mercosur agreement after 25 years of talks, signed a Digital Trade Agreement with Singapore, and continues advanced negotiations with India and Australia. These initiatives reflect the EU’s pivot toward Indo-Pacific trade diversification.
Singapore’s trade network continues to expand, with the Singapore–Mercosur Free Trade Agreement set to enter into force for Singapore and Paraguay in February 2026.

As the use of targeted tariffs and trade agreements continue to evolve through 2026, we are increasingly seeing a broader reordering of trade dynamics, particularly the diversion of trade outflows from China toward alternative markets such as Southeast Asia, India, Africa, and the EU.

Despite the escalation of Sino-American trade tensions in April 2025, China recorded a record-breaking trade surplus of $1.19 trillion for the year—the largest in history for any economy, according to data released by the Chinese government on January 14, 2026 (Dow Jones, Morningstar). While exports to the U.S. slumped by 20% as a direct consequence of the trade war, this was more than offset by strong export growth to ASEAN (+13%), India (+12%), Africa (+25%), and the European Union (+8%). The product-level breakdown shows China’s move up the value chain, with rising exports of semiconductors, autos, and ships, even as low-value goods like footwear and toys declined.

On the other hand, we are also increasingly seeing U.S. reducing its dependence on China and importing from other regions, with imports from ASEAN (+27%), Latin America (+6%), and the EU (+7%) rising year-on-year over the January–October 2025 period.

Overall, the growing web of bilateral agreements, regional partnerships (e.g. ASEAN–China FTA 3.0), tariffs and export controls presents both a compliance challenge and a commercial opportunity—particularly in engaging with fast-growing trade corridors across the Indo-Pacific, Africa, and the EU.