United States developments

Trump’s tariffs and the global trade order:1

It’s been a year since America’s so-called liberation day. The Financial Times (the FT) asks if US President Donald Trump has actually reshaped global trade?

The FT believes he has tried and failed to remake the world trading system with his tariffs.

By mid-June 2026, the United States and Iran signed a Memorandum of Understanding (the MOU) that achieved a ceasefire between the parties, stabilized oil prices, with stocks recovering much ground lost in the first four weeks of the war to the end of March 2026 (see below).

Earlier in an interview with the FT, President Trump said “his preference would be to take the oil”, comparing the move to Venezuela, where the US plans to control the oil industry indefinitely. President Trump indicated that he faces resistance at home in taking such a step.

Up to a month of war in Iran, global safe-haven bonds, and by comparison, riskier stocks suffered their biggest combined sell-off since 2022. The signing of the MOU and the ceasefire reduced the energy shock that had a serious adverse effect on investors.

There is considerable uncertainty as to whether the MOU can achieve its objectives and lead to a lasting peace between the parties (see below). There is also a risk of a run up in inflation as a result of the energy shock and potential food price shock caused by the war.

Inflation is always a concern for bondholders. The $30tn US Treasury market underpins global market and asset markets of all kinds. Instability in this market that prevents investors from getting hold of prices and getting deals done could have a continued negative impact on the market when markets are as fragile as this.

Global stagflation is a mix of slowing growth and rising prices. It’s difficult to deal with because central banks can’t raise interest rates to control inflation that comes from higher energy prices. Investors have their eyes on the fact that the US has midterm elections in November. There’s an assumption that Trump won’t want energy prices to get too high in the run-up to that. So, there is a hope that at some point, someone will be forced into a solution, such as the MOU. However, it’s becoming apparent to investors that it’s not up to Trump.

A lot has happened in the first year of US President Donald Trump’s second term: new global conflicts, fresh disputes with allies, and new tariff regimes. As of the beginning of April 2026, it marks one year since the president’s so-called liberation day announcement.

That Rose Garden speech was the official unveiling of a set of tariffs that would be enacted on countries around the world based on IEEPA, the International Emergency Economic Powers Act – a significant development. However it was a bigger deal when the Supreme Court this year ruled all of those tariffs illegal.

The word the FT emphasized when it comes to US tariff policy over the last year or so is whipsawed. So, how do America’s trading partners feel? Probably also whipsawed, possibly traumatised.

These latter parties feel that they thought there’s a lot more logic to Trump than there actually is. So, he will announce all of these things and they say, what do you want? And then because it turns out he wants about 10 different things, which all contradict each other, it compounds the confusion. They find it hard to grasp that. And the European Union in particular finds it difficult to negotiate with somebody whose objectives keep changing and who can’t really be relied on to keep a promise.

The question is whether Trump’s various tariff programs have upended, rerouted or changed global trade in a meaningful way on a permanent basis? Or is this all sort of just temporary until things settle down or even until another administration comes in?

During his first term, China continued to export to the US via third countries. Trump was then extremely keen that that wouldn’t happen again. As far as we can tell, he hasn’t really succeeded. Because Chinese exports are still roaring away. It’s still running a huge surplus with the rest of the world, but the bilateral deficit with the US or US’s bilateral deficit with China, rather, has fallen. The FT believes the same pattern is there. China is an incredibly competitive exporter in so many ways, and increasingly in high-tech goods and things that other countries actually can’t manufature. The sort of the logic of market forces means it will continue to export, and those things will find their way to the US somehow.

In terms of the trading system, the FT notes that there has not been a worldwide surge in protectionism. There just hasn’t been a lot of other countries cutting off trade between themselves. In fact, if anything, somewhat the opposite has occurred: countries have continued to sign trade deals. It’s the same with Trump. He’s pulled the US to some extent out of the trading system. Everyone else has looked at that and said we’re not going to do that.

When it comes to how the US behaves, the Supreme Court struck down the IEEPA-based tariffs, and that was seen as a huge blow to the president’s tariff strategy. But has it done anything to actually derail the administration’s ultimate goals? The FT believes that it will change the way they’ve responded. The Trump Administration signalled very clearly in advance of the decision what they were going to do, which is recreate the tariff wall using a range of other legal authorisations, specifically one which is supposed to deal with balance of payments crises. One which is supposed to deal with national security, and one which is supposed to deal with unfair trade.

There are areas in which the Supreme Court has traditionally deferred more to the president. So, it seems fairly likely that they will be able to rebuild that tariff wall to more or less what it was before the Supreme Court ruling.

Finally, for America’s trading partners over the next two and a half years that we have President Trump in office, is there any certainty about what trade will look like given he can really change on a whim?

The FT thinks he can, but one of the things that governments have discovered, Trump puts tariffs on and trade finds its way around. The US is quite a closed economy. It’s probably only 15 or 17 per cent of global imports. If the US wants to remove itself from trade to some extent it can do so. Everyone else will be looking for a source of final demand, but it’s not immediately catastrophic. The FT believes the world has reached peak tariffs and that President Trump has tried to remake the world trading system with them. He has failed. He has tried to close the US trade deficit with them. He has failed. Unless he goes completely insane and tries to cut off the US from the rest of the world altogether, the FT believes there’s a limited amount that he could do that he hasn’t already done and which is actually feasible for him to do.

Impact of US and Iran Memorandum of Understanding :

The US and Iran electronically signed an interim deal on Wednesday, June 17, 2026, that extends their ceasefire and offers concessions to the Islamic republic, according to a report by the FT.2

US President Donald Trump signed the memorandum of understanding in Versailles, France, on Wednesday after he said Washington would release frozen Iranian funds and lift sanctions “as soon as they behave”.

Washington’s interim deal with Iran to reopen the Strait of Hormuz would “terminate all types of sanctions” on Iran, including UN Security Council resolutions. stated that the US would work with regional partners to establish a $300bn fund for Iran’s “reconstruction and economic development”, which would be contingent on a final deal.

Earlier on Wednesday, the president played down talk of the US investing in the fund. A person briefed on the talks said it was designed for companies that wanted to invest in Iran. The interim deal extends the ceasefire and lays the framework for nuclear negotiations. The parties said they would find a “mutually agreed” mechanism to handle Iran’s enriched uranium. The MOU sets out a “minimum” for the dilution of the stockpile on site, under the supervision of the International Atomic Energy Agency.

Trump said he would allow Iran to keep some of its ballistic missiles. Critics of the president have asked whether the concessions Tehran made were worth four months of war, billions of dollars in cost, the depletion of US weapons stocks and friction with allies, as reported by the FT.

The shadow of Barack Obama hung over Donald Trump at the G7 summit on Tuesday (June 16, 2026) as he bristled at comparisons between his deal to end the US war with Iran and his predecessor’s nuclear pact with Tehran.3

“That was a road to a nuclear weapon,” the US president said of Obama’s 2015 agreement, which he fiercely criticised for years and scrapped during his first term in office. “Mine is a wall against a nuclear weapon.”

Trump’s agreement to end the conflict with Iran may have paved the way for a restoration of shipping traffic through the Strait of Hormuz, easing oil prices and rallying equity markets, but it has left him on the defensive.

Critics also point out that his deal is similar to the Joint Comprehensive Plan of Action, which was agreed under Obama and limited Iran’s nuclear programme in exchange for sanctions relief and has been a major concern of conservatives for years.

Referring to Trump’s claim on social media that his deal is the “complete opposite” of Obama’s, Morton Klein, president of the pro-Trump Zionist Organization of America, said: “While we hope that is the case, how will this be achieved? There appears to be no agreement at this time on how or whether to remove Iran’s nuclear stockpiles and decommission its nuclear facilities.”

Obama has weighed in to say his pact with Tehran was essentially on the same terms as Trump’s. “It is doubtful that any agreement that arises is going to be significantly different, or a significant improvement from the deal that we had in the first place and had worked for a long stretch of time before we, the United States, pulled out of it,” Obama said in an ABC interview due to be aired on Wednesday.

Trump’s relationship with his first-term predecessor has always been bitter. He has called Obama “the most ignorant president in history” and a “disaster”. Ditching the JCPOA was one of the signature foreign-policy achievements of his first term.

JD Vance, the vice-president and a top Republican contender to succeed Trump in 2028, has been at pains to point out the differences in the two deals as he has defended Trump’s agreement in television interviews in recent days. “If you go back to the Obama JCPOA, what it did was it took an Iranian nuclear programme that it accelerated. It basically bribed the Iranians to stop that programme,” he told CBS. Now, “the Iranian nuclear programme has been completely destroyed, and what we’re saying is: ‘make the long-term commitment to not rebuild it, and you will get the benefits that come with that’,” Vance said.

Trump did not release the text of the MOU until after it was signed at a ceremony in Switzerland on Friday (June 19, 2026), unsettling many Republicans in Congress.

Joni Ernst, Republican senator from Iowa, said: “A deal of this magnitude deserves thorough review. It is critical that the Senate has the opportunity to examine the details, ask tough questions and ensure America’s interests and those of our allies are protected.”

Asked whether he was confident Iran would give up its nuclear ambitions, John Kennedy, a Louisiana Republican senator, answered: “Unless you were homeschooled by a day drinker, no one’s confident that Iran is going to do anything.”

As well as scepticism that his deal is tough enough to curtail Iran’s nuclear ambitions, Trump is facing criticism from conservatives over potential sanctions relief for Tehran, the possible inclusion of a $300bn investment fund to be established for the Islamic republic and constraints on Israel’s actions in Lebanon.

The conservative National Review on Monday in an editorial said: “All told, there is the possibility that Trump would return the US to Obama’s failed Iran deal that Trump rightfully tore up in his first term, which would have all the makings of a humiliation after all of the president’s tough talk.”

Democrats are already attacking the deal. “While we want it to end, this agreement will be proof positive to the American people of what an absolute dumpster fire this war has been from start to finish,” Chris Murphy, Democratic senator from Connecticut, said on Tuesday.

Brian Katulis, a senior fellow at the Middle East Institute, a Washington think-tank, said even when the text was released it would be like “Swiss cheese”, given the number of gaps that need to be filled, with many of the toughest issues left to be thrashed out by US and Iranian negotiators over the next 60 days. “This deal essentially resets to the status quo ante with some costs paid to Iran just to reopen the Strait of Hormuz, and then it resets the clock on discussions that they have not been able to get to consensus on the nuclear issues and other things,” he said. However, Katulis agreed that Obama’s deal was different from Trump’s. The 2015 pact was “a very detailed and very technical agreement” with “implementation mechanisms and oversight”, he said, adding: “this thing sounds like something that was pieced together over WhatsApp messages”.

 

¹ FT News Briefing, Victoria Craig, Katie Martin and Alan Beattie, March 30, 2026, https://www.ft.com/search?q=how+trump+tariffs+ripped+up+the+global+trade+order (last visited June 26) .

² Alex Rogers, FT.com, June 26, 2026, https://www.ft.com/content/40c13aa0-4228-4068-8659-408f96e36172?syn-25a6b1a6=1 (last visited June 26, 2026).

³ James Politi and Abigail Hauslohner, FT.com., June 26, 2026 (‘Humiliation’: Donald Trump battles claims his Iran deal is worse than Obama’s) (last visited June 26, 2026).