When Trump Came for Everyone With Tariffs, China Fought, Europe Flinched, Japan Bowed; India Simply Walked Away

There is a test that powerful countries administer to everyone else every few decades. It is not announced formally. There is no letter, no ceremony, no official notice. The test arrives disguised as a trade policy. You discover you are being tested only by watching how you respond.

Trump administered that test in 2025. The tariffs were the instrument. The real question underneath them was simpler and older: how much humiliation will you absorb to keep America happy?

Every major economy answered differently. The answers were more revealing than any diplomatic communiqué.

China Bled First, Then Negotiated

China did what China always does when cornered. It hit back.

The moment Trump’s tariffs landed, Beijing retaliated, hard, fast, and with surgical precision aimed at the American constituencies that hurt most. Agriculture. Soybeans. Pork. The farmers in Iowa and Kansas who had voted for the man now watching their export markets evaporate. Bilateral tariff rates escalated rapidly until both sides were effectively taxing each other’s goods at 125 per cent, a trade war in everything but name, conducted with the cold efficiency of two countries that understand leverage.

It lasted months. It cost both sides real money. And then, in May 2025, they sat down and cut a deal, tariffs rolled back to ten per cent, a 90-day truce extended in August, formalised for a full year by November.

China did not get everything it wanted. But it negotiated from a position of demonstrated willingness to inflict pain. Washington knew, going into those talks, that Beijing had already shown it could make the phone ring in congressional offices across the Farm Belt. That knowledge shaped every sentence of the agreement.

You do not get a good deal by being easy to ignore.

Canada Went Loud, Then Went Quiet

Canada’s response was emotional, immediate, and very Canadian, which is to say it was righteous, noisy, and ultimately pragmatic.

Within hours of Trump’s announcement, Prime Minister Trudeau slapped 25 per cent retaliatory tariffs on $155 billion worth of American goods. Ontario pulled every bottle of American alcohol from government-run liquor shelves. Provincial premiers held press conferences. The phrase “economic sovereignty” appeared in Canadian newspapers approximately ten thousand times in a single week.

Then, by June, Canada paused further retaliation and entered negotiations. The shelves were quietly restocked. The trade talks ground on behind closed doors, away from the cameras that had captured all the initial fury.

Canada had made its point. It had shown it was not a pushover. It had then returned to the business of being America’s largest trading partner and closest neighbour, because geography and economics do not pause for diplomatic theatre.

The noise was genuine. So was the accommodation that followed. Canada fought for its dignity and then negotiated for its interests. Both things can be true simultaneously.

Europe Built Its Weapons and Never Used Them

The European Union spent much of 2025 in a state that can only be described as armed paralysis.

Brussels prepared retaliatory lists covering nearly €72 billion of American goods. It drafted legislation activating the Anti-Coercion Instrument — a legal mechanism designed specifically for moments like this one. It threatened to go after American services, American tech platforms, American financial firms operating within EU borders. The paperwork was meticulous. The political will was not.

Europe blinked. Repeatedly. Quietly. Without ever formally announcing that it had blinked.

The reasons were not difficult to identify. European economies depend on American markets to a degree that makes genuine trade war genuinely painful. And Europe’s dependence on Washington’s military support for Ukraine, a war being fought on European soil, paid for partly with American weapons, meant that Brussels could not afford to turn a trade dispute into an alliance crisis. Trump knew this. He had always known it. The tariffs on Europe were, in part, a test of exactly that dependency.

Europe failed the test by passing on the opportunity to take it. It armed itself thoroughly and then stood very still, hoping the moment would pass.

It mostly did. The cost was invisible but real, the credibility of the threat had been spent without anything to show for it.

Japan Bent the Knee and Got a Discount

Japan’s response was, in historical context, entirely unsurprising. It notified the World Trade Organisation of its intent to suspend concessions on steel, aluminium, automobiles and parts. It made the appropriate official noises. Then it negotiated.

Tokyo’s instinct, refined across a century and a half of managing the American relationship, through gunboat diplomacy and occupation and Nixon’s triple shocks and Bush’s dinner table incident, is always to find the accommodation rather than force the confrontation. Japan reached a trade agreement setting tariffs on its goods, including automobiles, at 15 per cent. Significantly below the 25 per cent that had been threatened. Meaningfully better than nothing.

Japan conceded. Japan got a discount. Japan went home.

There is no contempt in that observation. Japan’s circumstances, 54,000 American troops on its soil, an American-authored pacifist constitution embedded in its foundational law, a security architecture built entirely around the US-Japan alliance, leave Tokyo with genuinely limited room to manoeuvre. Japan knows this. Washington knows Japan knows this. The discount was the acknowledgement that Japan had been a cooperative subject.

A discount is not the same as respect. But it is what cooperative subjects receive.

Brazil Made Speeches

Brazil’s President Lula gave several impassioned addresses about sovereignty, fairness, the rights of developing nations, and the injustice of a global trading system designed by the powerful for the powerful. The speeches were good. They were well-delivered. They contained several genuinely quotable passages.

Brazil did not fire a single retaliatory shot.

Not one.

It evaluated potential measures. It confirmed willingness to negotiate. It reserved its position. It talked loudly, at length, and carried nothing at all.

And Then There Comes India

India did not retaliate. It did not make speeches. It did not prepare retaliatory lists it never used or schedule press conferences to announce tariffs it never imposed.

It filed a WTO challenge, a legal mechanism, quiet and procedural, that signalled disagreement without escalation. It absorbed the blow. And then it got on with its own business, which turned out to be rather more interesting than anything Washington had planned for it.

When Trump publicly claimed credit for mediating the India-Pakistan ceasefire after the May 2025 conflict, India rejected the claim flatly. No US role in the military negotiations, New Delhi said. Full stop. No diplomatic softening. No grateful hedging.

When Trump claimed India had agreed to slash its duties to zero, purchase $500 billion in American goods, and stop buying Russian oil entirely, Indian authorities confirmed none of it. Oxford Economics described the claims as unrealistic. India said nothing publicly and kept buying Russian oil, which it had been doing all along, which it continued doing through February 2026, and for which it eventually received a waiver from the very Treasury Department that had spent months punishing it for exactly this behaviour.

When Trump intensified outreach to Pakistan, even as he was hitting India with 50 per cent tariffs, India noted the irony and said nothing.

When the EU came calling, India signed what European Commission President Ursula von der Leyen called the “mother of all deals” — a trade agreement delivering an estimated €30 billion in export gains for both sides, accompanied by a defence pact. Modi then signalled warming relations with China. Precisely the strategic drift that Washington’s tariff pressure had been designed to prevent was happening, visibly, in full public view.

India’s exports to the US dipped 12 per cent in the final quarter of 2025. India’s economy grew 8.2 per cent in the same period, driven by its domestic market, which is large enough to not need Washington’s permission to function.

The tariff eventually came down to 18 per cent in the February 2026 truce. Trump announced it as a triumph. India accepted it as a correction.

What the Answers Tell You

China showed that if you make the cost of the tariff high enough, Washington will negotiate. Canada showed that you can be angry and practical simultaneously. Europe showed that a threat only works if you are willing to pull the trigger. Japan showed that a century of accommodation produces a discount, not dignity. Brazil showed that rhetoric unaccompanied by action is indistinguishable from silence.

India showed something different. It showed that a country large enough, confident enough, and strategically patient enough does not need to choose between fighting and submitting. It can simply decline to play on those terms, grow its economy, sign deals with other partners, wait for the logic of geography and demography to reassert itself, and let Washington eventually arrive at the conclusion India had been sitting on all along.

Trump came for India with tariffs, public insults, selective punishment, and demands that India manage its energy policy according to American geopolitical convenience. India filed a WTO complaint, kept buying Russian oil, grew at 8.2 per cent, signed a landmark deal with Europe, and waited.

China fought. Canada shouted. Europe trembled. Japan bowed. Brazil talked.

India walked away.

And Washington eventually followed when it conceded Russian oil for India amid Iran war.

How US Tariffs Played Havoc in Markets? Timeline of Key Tariff Moments

Over the past year, U.S. trade policy has swung sharply back toward broad-based tariffs, reviving uncertainty across global markets and supply chains.

The shift began on Feb. 1, 2025, when the administration imposed new tariffs on Chinese imports, citing fentanyl-linked supply chains, unfair trade practices and trade imbalances. Days later, Washington announced plans for 25% tariffs on imports from Mexico and Canada on national security grounds, though these were later paused and modified, with exemptions for USMCA-compliant goods.

The most dramatic move came on April 2, 2025, when the White House unveiled sweeping “Liberation Day” reciprocal tariffs on most U.S. imports. Invoking emergency powers, the administration imposed a baseline tariff of about 10%, with higher rates for selected countries. Subsequent executive orders in April and May adjusted rates and expanded coverage, including changes to duties on low-value Chinese imports.

Legal pressure mounted on May 28, when the U.S. Court of International Trade ruled that parts of the emergency tariffs exceeded presidential authority, throwing their durability into question. Despite this, tariff actions continued, including higher duties on copper imports in June and threats of tariffs of up to 50% on Brazilian goods in July.

By mid-2025, new tariffs were announced on Indonesian and Indian imports, while several high duties came into force in August amid diplomatic talks and WTO challenges. Further rate adjustments followed in November.

By late 2025, U.S. average tariff rates had climbed to multi-decade highs, boosting customs revenue but weighing on business confidence.

On Feb. 20, 2026, the Supreme Court struck down most emergency tariffs imposed under the IEEPA. Hours later, the president imposed a temporary 10% global tariff under separate legal authority, keeping trade tensions firmly in place.

Timeline of Market Movements

Feb. 1, 2025 – New US tariffs against China revive trade-war risk; Asian equities and exporters come under pressure.

Feb.–Mar. 2025 – Trump Threatens tariffs on Mexico and Canada unsettle North American supply chains before exemptions ease market stress.

April 2, 2025 – “Liberation Day” tariffs trigger global equity sell-offs, currency volatility and higher import-cost forecasts.

April–May 2025 – Repeated rate adjustments fuel uncertainty, complicating pricing decisions for manufacturers and retailers.

May 28, 2025 – Trade court ruling introduces refund risk for importers, lifting bond-market focus on fiscal exposure.

June 30, 2025 – Copper tariffs push metals prices higher and raise costs for construction and manufacturing firms.

July 2025 – Tariff threats against Brazil, followed by moves on Indonesia and India, widen emerging-market trade risk premiums.

August 2025 – Implementation of high tariffs lifts U.S. customs revenue but deepens concerns over inflation pass-through.

Nov. 2025 – Further tariff tweaks add to year-end volatility in equities and currencies.

Feb. 20, 2026 – US Supreme Court ruling briefly boosts markets on hopes of tariff rollback.

Feb. 20, 2026 – A new temporary 10% global tariff reins in optimism, restoring uncertainty over trade, inflation and growth.

After tariffs, what’s Trump’s next Move? Watch out US dollar weakening

As the dust begins to settle down on President Donald Trump’s latest tariffs, speculation is growing over his next move. With the dollar as the world’s reserve currency, Trump has powerful tools to pressure allies—credit access, dollar funding, and payment systems, which may be wielded as powerful weapons to subject compliance from foes and allies together.

Deploying these weapons would carry major risks for the U.S. economy and could backfire, but some experts warn they remain on the table if tariffs fail to cut the trade deficit. A weakening US dollar can have wide-ranging effects across global markets, businesses, and consumers. When the dollar loses value against other currencies, imported goods become more expensive for American consumers, increasing the cost of electronics, automobiles, and household products. Inflationary pressures may also rise as businesses pass on higher costs, eroding purchasing power.

On the other hand, a weaker dollar benefits US exporters by making American goods and services more affordable for foreign buyers. This can boost demand for US-made products, potentially leading to increased revenues for companies with international markets. Sectors like manufacturing, agriculture, and tourism often see gains as foreign customers find US goods and destinations more cost-effective.

“I could well imagine Trump getting frustrated and trying to implement wacky ideas, even if the logic isn’t there,” Barry Eichengreen, economics professor at UC Berkeley, told Reuters.

The administration’s apparent goal is to weaken the dollar to rebalance trade, potentially through a Mar-a-Lago Accord—a nod to the 1985 Plaza Accord and Trump’s Florida resort.

Stephen Miran, a Trump adviser, has suggested the U.S. could pressure foreign central banks to strengthen their currencies by leveraging tariffs and security commitments. But analysts say such a deal is unlikely, as higher interest rates would risk recession in Europe and Japan, and China needs a weaker yuan to revive growth.

If currency talks fail, Trump could take more extreme measures, such as restricting foreign access to dollar liquidity. Cutting off Federal Reserve swap lines—vital for global banks in times of crisis—could roil financial markets and hit European, Japanese, and British lenders hardest. Investors and financial markets also react to a weakening dollar in various ways.

US-based investors with holdings in foreign assets may see gains as those investments appreciate in dollar terms. Conversely, foreign investors holding US assets could experience lower returns if the dollar depreciates. The currency’s decline may also impact the bond market, as investors demand higher yields on US Treasury securities to compensate for currency risk.

Though the Fed controls these programs, Trump’s reshuffling of key financial regulators has raised concerns. “It’s no longer unthinkable that this could be used as a nuclear threat in negotiations,” said Spyros Andreopoulos of Thin Ice Macroeconomics.

But such a move could ultimately weaken the dollar’s status as the world’s dominant currency.

Commodity prices often respond significantly to dollar fluctuations. Since key commodities such as oil and gold are priced in US dollars, a weaker dollar generally pushes their prices higher. This can lead to increased costs for businesses that rely on raw materials, further fueling inflationary trends. On the flip side, commodity-producing countries may benefit from stronger revenues as the prices of their exports rise.

Another pressure point is the U.S. payments industry. Visa (V.N) and Mastercard (MA.N) process two-thirds of card transactions in the eurozone. While China and Japan have developed alternatives, Europe remains reliant on U.S. payment networks.

If the White House pressured these firms to cut off services—similar to actions taken against Russia—European consumers would be forced to rely on cash or slow bank transfers. “A hostile U.S. is a huge setback,” said Maria Demertzis of the Conference Board think tank. International trade dynamics can shift as countries reassess their economic strategies in response to currency fluctuations.

Ultimately, a weaker dollar carries both advantages and disadvantages depending on one’s perspective. While US manufacturers and exporters may enjoy competitive benefits, consumers and businesses reliant on imports could face higher costs. Investors must navigate currency risks carefully, and policymakers must balance economic growth with inflation control. The dollar’s movements influence economies worldwide, making its strength or weakness a critical factor in global financial stability.

Weakening Dollar

A weakening US dollar can have wide-ranging effects across global markets, businesses, and consumers. When the dollar loses value against other currencies, imported goods become more expensive for American consumers. Precisely because it takes more dollars to buy the same amount of foreign currency, raising the cost of imported electronics, automobiles, and everyday household products. Inflationary pressures may also increase as businesses pass higher costs on to consumers, reducing purchasing power.

On the other hand, a weaker dollar benefits US exporters by making American goods and services more affordable for foreign buyers. This can boost demand for US-made products, potentially leading to increased revenues for companies with international markets. Sectors like manufacturing, agriculture, and tourism often see gains as foreign customers find US goods and destinations more cost-effective.

Investors and financial markets also react to a weakening dollar in various ways. US-based investors with holdings in foreign assets may see gains as those investments appreciate in dollar terms. Conversely, foreign investors holding US assets could experience lower returns if the dollar depreciates. The currency’s decline may also impact the bond market, as investors demand higher yields on US Treasury securities to compensate for currency risk.

Commodity prices often respond significantly to dollar fluctuations. Since key commodities such as oil and gold are priced in US dollars, a weaker dollar generally pushes their prices higher. This can lead to increased costs for businesses that rely on raw materials, further fueling inflationary trends. On the flip side, commodity-producing countries may benefit from stronger revenues as the prices of their exports rise.

Government policies may force the Federal Reserve respond by adjusting interest rates to stabilize the currency and control inflation. Meanwhile, other central banks might intervene in currency markets to prevent excessive volatility. International trade dynamics can shift as countries reassess their economic strategies in response to currency fluctuations.