The tariffs imposed by the US became the big economic story of 2025, as much for what they didn't do as for the disruption they engendered and outcry they caused. They might be shouldering too great a burden.
There hasn't been a global recession, yet. Nor, despite dire warnings, has there been much by way of retaliation, except for some actions by China. And trade-dependent nations like Vietnam and Singapore, far from being forced out of business, reported respectable growth figures at the close of the year.
Looks can be deceiving. A mix of pared-down duties, exemptions, and favorable inner-workings of the shipping industry have taken the bite out of US President Donald Trump’s actions. This doesn't mean things are great. “The peak of the storm may have passed, but as Dorothy observed in The Wizard of Oz, ‘we’re n ot in Kansas anymore,’” wrote Gita Gopinath, a former first deputy managing director of the International Monetary Fund, and Brent Neiman, a professor at the University of Chicago, in a December paper.
Singapore, which rose to prosperity in an era of free trade, can take heart from recent readings. Gross domestic product rose 4.8% in 2025, stronger than expected. So resilient has growth been that economists are beginning to game out when the central bank will tighten policy. The city-state's leaders are, nonetheless, warning citizens that the tariffs represent a fundamental break from practices of the last half century. The duties weren’t the act of a friend, according to the prime minister. The country, home to one of the world’s busiest container ports and regional headquarters for an array of multinational corporations, will need to rethink its development strategy.
Far from slowing down, Vietnam — seller of everything to America from shoes to computers — is surging. Growth topped 8% in the fourth quarter, exceeding all estimates and moving at the fastest clip since 2011. Last month, exports jumped by almost a quarter, and manufacturing turned in a fine performance. The country's trade surplus with the US, a gap that put it in the crosshairs of the White House, widened to a record $134 billion. Hanoi caught a break by engaging with Trump soon after the initial levies — a hefty 46% — were unveiled. It settled for 20%, roughly the level of most Southeast Asian nations.
How has the global economy been able to survive so far? An important part of the answer, according to Gopinath and Neiman, was the discrepancy between the statutory tariff rate and the rate actually paid. The average was about 27.4% in late September, but importers incurred only around half that figure. The difference is driven partly by shipment lags: Several months may pass before a newly unveiled tariff rate applies to goods, something described as an “on the water exemption.” Secondly, specific products or companies have been offered breaks; some firms are treated more favorably if they intend to invest in manufacturing in the US.
And, despite Trump's frequent sniping at Canada and Mexico, a large chunk of trade between those countries and the US falls under the pact that replaced the North American Free Trade Agreement — and kept many of its key elements.
None of this means the global economy is set for smooth sailing. Writing in the Financial Times last week, Gopinath stressed that the damage from the trade war may take years to fully materialize.
The world economy is forecast to grow 3.1% this year, according to the IMF, little changed from 2025. Despite the cry that tariffs amounted to a “sell America moment,” demand for US assets among foreigners has held up partly owing to the boom in artificial intelligence. While the dollar had a rough year, the Treasury market had its best one since 2020.
There's plenty about Trump's agenda to dislike. The president has been disdainful of the independence of the Federal Reserve and has little enthusiasm for the security alliances that support the dollar's role as the global reserve currency. “I kind of wonder whether we are a bit fixated with tariffs,” Linda Tesar, a professor at the University of Michigan, told a panel at the American Economic Association’s annual meeting on Jan. 3 in Philadelphia.
Proxies for globalization like Vietnam and Singapore have a right to be uneasy. Therest of the world economy can take encouragement from their resilience and hope that their performance is more signal than noise. Tariffs make for troubling headlines. The fine print provides a welcome balm, for now.