Trump 2.0 Trade Strategy: Sectoral Analysis of Economic Impacts from US-Led Trade Wars (2025–2026)

The global trading system is entering a volatile phase as the United States pursues aggressive trade policies. Ongoing tariffs and export controls set during the 2018–19 US-China trade war remain largely in place, and a potential second Trump administration in 2025 threatens to escalate conflicts with allies and rivals alike. This report analyzes the economic fallout of current and hypothetical future US-led trade wars on four key regions – the United States, United Kingdom, European Union, and China – with a focus on the top five most affected economic sectors in each region. I compare winners and losers across these regions, examining the scale and direction of impact on each sector, the trade mechanisms (tariffs, supply chain disruptions, investment shifts) at play, the interdependencies linking these economies, and the strategic adjustments underway (such as reshoring and market diversification). The analysis draws on the most recent data and expert assessments to project outcomes for 2025–2026 under both current policy trajectories and a scenario of intensified “Trump-like” protectionism.

Current Trade Policy Trajectories (2023–2024)

Under the Biden administration, US trade policy has remained tough on China (keeping most tariffs and adding tech export bans) but has sought rapprochement with allies. Tariffs on over $360 billion of Chinese goods (about 2/3 of Chinese exports to the US) still persist from the 2018–19 trade war , and China maintains retaliatory duties on US exports (hitting agriculture hardest) . The result is a partial decoupling: by 2022, US exports to China had barely returned to pre-trade-war levels and then lagged behind other countries . Even after a 2020 “Phase One” truce, China never met its extra $200 billion purchase commitments (buying none of the promised increase in US exports) . Both sides have increasingly diversified trade away from each other, fearing that the other may “weaponize” trade ties .

Meanwhile, the US and EU negotiated a tariff ceasefire in longstanding disputes (e.g. Boeing-Airbus subsidies), suspending mutual tariffs on products like aircraft and food through 2026. The UK, after Brexit, struck its own mini-deals (for example, the US lifted Trump-era steel tariffs on the UK with quota limits). China and the EU adopted a cautious stance of “de-risking” rather than full decoupling – trade flows remain large, but the EU has tightened investment screening and considered safeguards (e.g. on Chinese EV imports). Global supply chains have begun realignment: US importers shifted sourcing to Mexico, Vietnam and others to bypass China tariffs , while China has increased purchases from Brazil, ASEAN, and domestic suppliers to replace US goods . This status quo has kept trade tensions manageable, but key sectors are already feeling strain from existing tariffs and “slow decoupling” pressures.

Potential Escalation Under a Second Trump Administration (2025–2026)

A Trump 2.0 trade policy would likely amplify protectionism on multiple fronts. The Trump team has signaled plans for sweeping new import tariffs – reportedly a universal tariff of 10–20% on all imports as “reciprocal” retaliation against trading partners with surpluses . In March 2025, President Trump even resurrected a 25% tariff on imported autos and parts citing national security , a move that shocked allies. Such measures portend a broad-based trade war not only with China but also with the EU (especially Germany and other auto-exporting nations) and possibly the UK.

Under this scenario, tariffs could cover virtually all Chinese exports to the US (over $400 billion) , up from two-thirds currently, and high duties would hit sensitive European exports like cars and pharmaceuticals . China would undoubtedly retaliate further – likely re-imposing or increasing tariffs on all US goods (they had already covered 95% of US exports in the first round ) and potentially weaponizing its dominance in certain raw materials (e.g. restricting exports of rare earth elements critical to US/EU industries). The EU and UK could also strike back with tariffs on iconic American products (as the EU did in 2018, targeting Harley-Davidson bikes, bourbon whiskey, etc.). The stage would be set for a more complex, multi-front trade war.

Critically, economic interdependence means no region can escape collateral damage. Many supply chains are global: tariffs would raise input costs for domestic manufacturers and disrupt cross-border production networks. For example, the US auto industry depends on components from Canada, Mexico, Europe, and Asia – a 25% auto tariff could drive up car costs by thousands of dollars and cause job losses due to reliance on imported parts . European automakers similarly rely on US and China sales and integrated supply lines (German auto plants source parts globally and export finished cars abroad) . These linkages mean trade barriers often “boomerang”: initially shielding one sector but ultimately harming downstream or upstream sectors elsewhere.

In the following sections, we detail the top five sectors in each region that would be most affected by an escalated US-led trade war in 2025–26. For each sector, we assess the direction and magnitude of impact, the trade war mechanisms involved, cross-region spillovers, and adaptive strategies. A summary comparison table is provided at the end.

United States: Key Affected Sectors (Winners & Losers)

Despite initiating the tariffs, the United States saw mixed outcomes in different sectors during the first trade war – and a renewed conflict would similarly create a few protected “winners” but many more losers. Overall, economists note that tariffs hurt US manufacturing and employment on net, as any gains from import protection were more than offset by higher input costs and foreign retaliation . With broader tariffs and counters in a Trump redux, we expect significant disruptions in the following sectors:

• 1. Agriculture (Negative) – US farmers are among the biggest losers in trade wars. Agriculture was America’s largest export to China pre-conflict (especially soybeans, corn, pork, and wheat). China’s retaliatory tariffs in 2018–19 caused a 77% collapse in US soybean exports to China , as China shifted to Brazilian suppliers. In total, US farm exports fell by $27 billion from mid-2018 to end-2019, with soybeans accounting for 71% of the losses . While a 2020 deal prompted some rebound, American farmers have not regained their pre-war market share . Under renewed tariffs, China and other nations are again “seeking more dependable alternatives” to US farm goods – for example, China has lined up South American suppliers for soy, chicken, and pork, and may turn to Australia for grains . This demand diversion would depress US crop prices and farm incomes. Meanwhile, American farmers get hit on the cost side too: tariffs on steel, aluminum, and imported fertilizers make farm equipment and inputs pricier . Higher machinery and fertilizer costs (Canada supplies much of US potash fertilizer) squeeze farmers’ margins . The double blow – lost export sales and cost inflation – means agriculture faces severe strain. The only “positive” is that the US government would likely step in with bailouts again (over $23 billion was paid to farmers after 2018–19 ), effectively shifting the burden to taxpayers. In summary, US agriculture stands to lose significant foreign market access (especially in China) and will require costly support to stay afloat.

• 2. Manufacturing & Machinery (Mixed/Negative) – A core aim of Trump’s tariffs is to boost US manufacturing, but results so far show net negative effects on the sector . Tariffs do protect some factories by deterring imports, but they also raise input costs (many US manufacturers rely on imported parts and materials) and provoke retaliation that cuts off export markets . A Federal Reserve study found that the 2018–19 tariffs actually reduced overall US manufacturing employment by ~1.4%, as modest job gains in protected industries (+0.3%) were outweighed by larger losses from costlier inputs (-1.1%) and retaliatory export curbs (-0.7%) . The interdependency is clear: for example, tariffs on imported steel helped US steel mills, but downstream sectors like appliances, construction equipment, and auto parts that use steel were hurt by higher costs. Jobs in steel-using industries outnumber steel-producing jobs by roughly 80 to 1 , so economy-wide, more jobs were lost than saved. In an escalated trade war, this pattern will continue. Machinery, heavy equipment, and electrical gear – major US exports to both China and Europe – would face declining foreign demand (as tariffs make US machines more expensive overseas) and potential supply disruptions (if foreign components are restricted). For instance, a company making construction machinery in Illinois might benefit if imported competitors are taxed, but if that same US company exports to Europe or China, it could now be shut out by retaliatory tariffs. Many capital goods producers also have global supply chains. Thus, while some domestic manufacturers of import-competing products (e.g. certain appliances or industrial materials) could see a short-term boost in U.S. sales, the manufacturing sector overall is likely to contract under an all-around trade war. Notably, US producers of steel and aluminum are partial winners – their output and prices rose when imports were taxed – but industries using those metals (from canned food to automotive) suffered. In short, manufacturing presents a mixed picture, but the balance tilts negative when broad tariffs disrupt the integrated production networks. Real-world data from the last war showed higher prices for inputs and lower export competitiveness outweighed any gains, leading to factory job losses and investment delays .

• 3. Automotive (Mixed, leaning Negative) – The US auto sector sits at a crossroads of the trade war, with both protective tariffs and retaliatory risks. In a second Trump term, the US has now imposed a 25% tariff on imported cars and parts (up from just 2.5% before) . This is intended to protect Detroit automakers and bring back auto jobs. In the short run, domestic auto production could see some gains: imported vehicles (from Europe, Japan, Korea, even the UK) would become much costlier, potentially steering American consumers toward US-made models. However, any benefit to US auto assemblers comes with major caveats. First, modern car manufacturing is highly globalized – roughly half of the components in “American-made” cars are imported . Tariffs on parts raise production costs for US-based factories, likely increasing car prices for consumers by several thousand dollars per vehicle . This dampens demand and could erase sales gains for the Big Three automakers. In fact, the Center for Automotive Research warns that such tariffs will cost US auto jobs as higher prices curb sales . Secondly, US automakers rely on export markets (especially Canada, Mexico, and China) which are now in jeopardy. Retaliatory tariffs from those partners could hit U.S.-made vehicles. China, for example, slapped a 40% tariff on US car imports in 2018 (cutting deeply into the sales of some American brands until it was partially lifted). If trade tensions flare, China could again penalize American car companies – not only by tariffs on imported cars, but also by favoring European or domestic electric vehicles. Moreover, European and Japanese carmakers that sell in the US might shift more production into America (to bypass tariffs), increasing investment in U.S. plants – a potential plus for U.S. manufacturing jobs. But that relocation takes time and depends on stable policy. The immediate effect of a 25% import tariff is likely negative for U.S. consumers and parts suppliers (higher costs, disrupted supply lines) and ambiguous for U.S. automakers (less import competition but a smaller overall market). If Europe and others retaliate (e.g. EU could target U.S. auto exports or other goods), the U.S. auto sector could also face indirect pain. On balance, while protected from foreign competition at home, the U.S. auto industry may see only modest gains domestically and significant risks abroad, making it a tenuous winner. Auto workers in assembly might cheer the tariff (the UAW union welcomed the move as “long overdue” ), but workers in parts manufacturing or dealerships could suffer if sales stagnate. Interdependency is key: many “foreign” cars are built in the US and many “American” cars are built in Mexico/Canada – tariffs upend this integration, hurting the very industrial base they aim to help .

• 4. Technology & Electronics (Negative) – The tech sector is at the forefront of US-China economic interdependence, and thus highly exposed in a trade war. This includes consumer electronics (smartphones, computers, TVs), telecommunications equipment, and semiconductors. Tariffs on Chinese imports directly affect US tech companies because most gadgets sold in America are assembled in China. Notably, Apple relies on China for ~95% of its production , making the iPhone and other devices a prime target. In 2019, the Trump administration threatened 15% tariffs on smartphones, laptops and other electronics – duties that would have hit Apple and U.S. consumers hard . (Those tariffs were partially averted or delayed during negotiations.) If revived, such tariffs would increase consumer prices and pressure profit margins unless firms find alternatives. Tech firms have started diversifying supply chains – e.g., Apple began shifting some assembly to India and Vietnam – but progress is slow; China’s unmatched manufacturing ecosystem is not easily replaced. Early trade war salvos already showed stress: Apple’s stock fell on tariff news , and the company lobbied for exemptions on critical components. Should trade tensions escalate, US tech giants could face Chinese retaliation beyond tariffs: China might hamper their China sales or operations. For instance, Chinese authorities could encourage consumers to shun iPhones in favor of Huawei, or impose restrictions on US tech services (China is a huge market for Apple, Intel, Qualcomm, Tesla, etc.). Indeed, once-major US exports like Boeing jets and automobiles have “all but disappeared” from China’s market by 2022 due to trade war and tech controls , and semiconductor sales to China are now dropping due to US export bans . A second Trump administration would likely double down on tech export controls (restricting advanced semiconductors, 5G equipment, AI technology, etc. from going to China), further hitting US chipmakers’ revenue in China. U.S. firms like Nvidia, Qualcomm, and Intel stand to lose one of their largest customers, as China invests in homegrown chips to substitute. On the flip side, some segments of U.S. tech might see gains: domestic producers of equipment or components that were sourced from China could see new demand if Chinese imports are tariffed or banned. Additionally, U.S. cloud and software firms could benefit if Chinese rivals (e.g. TikTok, Huawei) are banned from Western markets on security grounds. Overall, however, the tech sector’s integration with China’s supply chain and market means it faces significant disruption. Look for accelerated “reshoring” of electronics assembly (possibly to Mexico or Southeast Asia) and huge government support for domestic semiconductor manufacturing (via the CHIPS Act) as strategic responses. But these adjustments take years; in the near term, electronics prices would rise and U.S. tech exports would fall, making this sector a casualty of decoupling.

• 5. Aerospace & Defense (Negative) – Aerospace has been a battleground of US-EU and US-China trade tensions, and the US industry (exemplified by Boeing) has taken hits in recent years. During the US-China trade war and the parallel Boeing-Airbus dispute, Boeing lost significant international orders. Chinese airlines pivoted to Airbus, ordering 292 Airbus jets ($37 billion) in 2022 while Boeing was largely shut out . Geopolitical strains (and the 737 MAX safety crisis) have allowed Airbus to pull far ahead in the Chinese and global market . Boeing – historically America’s largest exporter – now laments that “geopolitical differences” are constraining US aircraft sales . In a protracted trade war, Chinese airlines would continue to avoid Boeing, depriving the US aerospace sector of a critical market. Furthermore, if Trump’s tariffs target the EU, the US may re-impose a 10% levy on imported Airbus planes (which raises costs for US airlines buying them). The EU would likewise maintain tariffs on Boeing jets. This means reduced competitiveness for Boeing in both China and Europe, translating to fewer production orders and jobs in the US aerospace supply chain. Defense aerospace might see a slight uptick if geopolitical tensions spur higher defense spending or if exports of US military aircraft to allies increase (as allies turn away from Russian or Chinese suppliers), but commercial aviation is the bigger economic driver. Space and drone technology transfers could also become politicized; US firms might lose commercial satellite launch contracts abroad if rivalry intensifies. One nuance: General aviation and aircraft parts – the US exports many airplane engines, parts, and business jets to Europe/China – could face new tariffs. For example, China could retaliate against a US-EU trade alignment by buying aerospace components from Europe instead of GE or Pratt & Whitney in the US. The net effect on the US aerospace sector is negative, with lost foreign sales far outweighing any protection at home (since Airbus doesn’t export finished jets to the US in huge numbers aside from airline purchases). Notably, Boeing’s lost market share to Airbus is essentially a gain for Europe (see EU section), underlining how one region’s pain can be another’s gain in a trade war. The U.S. aerospace sector’s strategy will be to lean on defense/government contracts and diversify into friendly markets (India, Middle East) to compensate for hostile ones. But replacing the China market is extremely difficult, so expect reduced production and employment in U.S. civil aerospace if these trade conflicts persist.

(Honorable Mention: Consumer Goods & Retail – while not a “sector” in the production sense, U.S. retailers and consumers will be impacted across the board by broad tariffs. Import-heavy consumer industries – e.g. apparel, footwear, furniture, electronics retail – would see cost increases that could suppress sales. Tariffs on everyday goods from China, Europe, or elsewhere act like a tax on consumers, estimated at several hundred dollars per household . This sector isn’t elaborated in top five since its impacts are diffuse, but it underscores that American consumers ultimately foot much of the bill for tariffs in the form of higher prices.)

Summary (US): In a full-blown trade war, the United States would see concentrated pain in agriculture, tech, and globally integrated manufacturing sectors, which lose markets and face higher costs. A few industries with strong domestic focus or tariff protection (steel, basic manufacturing, perhaps some auto segments) could gain temporarily. However, consensus among experts is that such broad trade wars leave “practically no winners” in the long run , as efficiency losses and retaliation drag down the overall economy (one estimate from Oxford Economics pegged the first trade war’s toll at 245,000 fewer U.S. jobs and a 0.5% GDP hit ). The US will attempt strategies like reshoring production (to reduce dependency on adversaries) and friend-shoring (sourcing more from allies like Mexico or India). Those adjustments are underway but will take time to fully materialize. In the interim, US sectors with heavy trade exposure brace for volatility and possible government relief measures to offset the fallout.

United Kingdom: Key Affected Sectors

The UK finds itself in a delicate position, being a close US ally but also economically intertwined with the EU and China. While the UK was not a primary target of Trump’s trade crusades, it became “collateral damage” in broader US-EU disputes (e.g. in the Airbus subsidies case) and would be similarly exposed if global trade tensions rise. Post-Brexit, the UK faces trade wars without the collective shield of the EU, but also with the flexibility to craft its own trade responses or deals. The top affected British sectors reflect both direct hits from tariffs and indirect effects from a cooling global trade environment:

• 1. Spirits & Beverage Exports (Negative) – The UK’s iconic Scotch whisky industry offers a clear example of trade-war collateral damage. In October 2019, the US imposed a 25% tariff on single-malt Scotch whisky as part of retaliation in the US-EU Airbus dispute . The impact on UK distillers was severe: over the 18 months that tariff was in force, the Scotch whisky industry lost £600 million in exports to the US (over £1 million per day) . This was a devastating blow to a sector that relies on the US as one of its largest markets. The tariffs were suspended in 2021, but only temporarily – they are due to snap back in 2026 if no resolution is reached . A reignited trade war could easily see the return of US tariffs on whisky (and possibly on other UK specialty exports like gin or beer). Likewise, the UK might face choices about retaliating in kind; during the steel tariff episode, the EU (including the UK, pre-Brexit) hit American bourbon whiskey with tariffs, so the UK could similarly target US spirits or farm goods. For the Scotch industry, the uncertainty is already prompting strategic lobbying for a permanent solution . Distillers may try to diversify export destinations in the meantime (aiming to increase sales in Asia and emerging markets to offset potential US losses). But realistically, no market can replace the US for premium whisky in the short term, so a protracted tariff would likely mean lower revenues, reduced investment, and perhaps job cuts in the spirits sector. Beyond whisky, other UK food & drink exports could be affected by spillovers: for example, British specialty cheeses, cookies, and pork products were also on the 2019 USTR tariff list . Thus the broader agriculture/food sector in the UK – while not as large as in the US or EU – stands to lose out if transatlantic tariffs resume. In sum, UK high-value food and beverage producers are clear losers in any US-EU trade confrontation, caught in the crossfire of unrelated disputes.

• 2. Automotive Manufacturing (Negative) – The UK’s automotive sector, which includes both domestic brands (Jaguar Land Rover, Mini) and foreign automakers’ UK plants (Nissan, BMW, Toyota), is highly trade-dependent. A large share of UK-built cars are exported, and key export markets include the EU, US, and China. In a US-led trade war scenario, the UK auto sector faces two challenges: direct US tariffs and indirect effects via supply chains. If the US auto tariff (25%) is applied uniformly, UK car exports to the US would become much more expensive unless exempted via a bilateral deal. The UK is not one of the top auto suppliers to the US (compared to Mexico, EU, Japan), but it does export high-end vehicles – for instance, Range Rovers, Bentley and Rolls-Royce models (owned by German firms) – which would suffer a demand drop if priced 25% higher. On the flip side, the UK might seek a quick trade agreement with Washington to remove or reduce such tariffs for UK-origin cars, capitalizing on the political goodwill between London and a Trump administration. However, any such deal would come with demands (e.g. the UK lowering standards or opening its agriculture market to US products), which complicates the timeline. In the interim, UK-based production could decline if manufacturers decide to scale back UK output in favor of US-based production to serve the American market tariff-free. Additionally, UK auto manufacturing is deeply integrated with the European supply chain – most parts move freely between the UK and EU. EU-US trade tensions can disrupt this flow: for example, if German-made components face US tariffs, UK plants that incorporate those parts could also face bottlenecks or higher costs. Similarly, if China’s economy slows or China imposes retaliatory tariffs on autos from US allies, UK luxury carmakers (which have significant sales in China) could see reduced Chinese demand. It’s notable that in the 2018–19 skirmish, global auto stocks (including UK-linked companies) fell on fears of US tariffs . In summary, the UK auto sector is vulnerable: it does not stand to gain much from any protection, yet it could lose export sales in the US and elsewhere. The one slim positive is if the UK’s “special relationship” yields an exemption – e.g. the UK could be carved out of US auto tariffs if Trump views Britain more as an ally than a trade adversary. But absent that, UK car manufacturing could contract, accelerating an already difficult period (the industry has been grappling with Brexit-related uncertainty and the shift to electric vehicles). The strategic response for UK auto will be seeking trade diversifications (the UK recently joined the CPTPP trade pact in the Pacific) and emphasizing models with domestic UK/EU markets. Yet, being a mid-size player, the UK has limited leverage to avoid collateral damage.

• 3. Aerospace (Mixed/Negative) – The UK has a significant aerospace industry, heavily entwined with European programs and US defense partnerships. On the civil side, the UK is a key part of the Airbus consortium (Airbus manufactures wings in Britain) and also produces aircraft engines (Rolls-Royce). In the US-EU Boeing/Airbus dispute, the UK found itself in a tricky spot: as an Airbus partner it was hit by US tariffs (like the whisky tariff), even as it was negotiating its post-Brexit trade stance. Going forward, if transatlantic trade war reignites, UK aerospace manufacturing could be indirectly hit. A US tariff on Airbus planes (10% was imposed in 2019 ) affects the demand for Airbus jets among US airlines, which in turn could mean fewer orders and lower production – impacting the UK factories that make wings and aerospace components for those jets. Additionally, any European retaliation against Boeing (which was suspended in the truce) would involve the UK since Rolls-Royce engines often go into Boeing aircraft as well. Interdependency: The aerospace supply chain is global – UK-made parts go into both Airbus and Boeing planes, and UK airlines buy both. A trade war that forces airlines to pay more for imported jets simply hurts air travel and fleet renewal on both sides, shrinking the pie for everyone. On the defense/military side, a US-China rift might benefit the UK if, say, countries avoid Chinese aircraft and buy more from Western suppliers (possibly including UK defense exports). However, China’s market for Western civil aerospace is effectively closed under conflict (China is not buying Boeing, but also punished UK by excluding Rolls-Royce from some projects when the UK criticized China on political issues). The net effect for UK aerospace leans negative because the sector’s success relies on open global markets. Rolls-Royce, for example, sells engines worldwide; any trade fragmentation that pits US vs China vs EU blocks could complicate its market access. On a positive note, the Airbus vs Boeing rivalry under trade war conditions has seen Airbus (and thus UK’s Airbus workshare) gain relative ground in China – China’s big Airbus order in 2022 came at Boeing’s expense . If Europe (including UK) stays on better terms with China than the US does, UK aerospace might indirectly benefit via Airbus winning more Chinese business. But if Trump also clashes with Europe, and Europe sides with the US on China, then China could retaliate on all Western aerospace. In that worst case, Chinese airlines could accelerate efforts to use domestic aircraft (COMAC jets) or favor suppliers from Russia/Global South, squeezing both Boeing and Airbus. The UK’s strategy here is mostly tied to the EU/US resolution – it will push diplomatically to keep the Airbus-Boeing subsidy dispute settled (to avoid renewed tariffs in 2026) . If successful, UK aerospace might dodge a bullet. If not, this high-tech manufacturing sector faces an uncertain outlook, with possible production cutbacks and a need to lean more on defense and space contracts.

• 4. Steel & Metals (Negative) – The UK’s steel industry is small but symbolically important, and it has already been through the wringer of Trump’s tariffs. In 2018, the US levied a global 25% tariff on steel (and 10% on aluminum) on national security grounds, which hit UK steel exporters (like Tata Steel’s UK mills) hard until a quota arrangement was reached in 2022. Trump’s return could mean reinstating strict tariffs/quotas on UK steel and aluminum exports to the US. This would be a direct negative for the metals sector: the UK annually exports hundreds of thousands of tonnes of steel, and the US is a high-value market for certain specialized products. Losing competitiveness in the US due to tariffs could further weaken an industry already facing high energy costs and competition from cheaper Asian steel. Moreover, if the UK sides with the US against China, China might curtail imports of UK metals or flood the world market with cheap excess steel (since the US market is closed), driving global prices down – hurting UK steelmakers’ profitability. On the flip side, a silver lining is that a broader US-EU trade war might redirect some EU steel (which would have gone to US) into the UK market, potentially lowering raw material costs for UK manufacturers (but that’s a marginal benefit and also would pressure UK steel producers). The mechanism here is straightforward tariffs, but there’s also an investment dimension: global steel companies (like Tata) may decide to invest less in UK operations if trade barriers impede exports, instead focusing on plants in countries with easier US access. While some in the US (and even UK) steel sector initially cheered tariffs as a way to fight Chinese overcapacity, the fact remains that UK steel producers are too small to gain any pricing power from US protection, yet they suffer from being shut out of markets. As a result, the UK metals sector – including producers of specialty alloys and aluminum components – is likely to lose. The government may consider domestic procurement policies (favoring UK steel in public projects) to shore up demand, but WTO rules and higher cost could limit this. In essence, UK steel is a pawn in the US-China game – vulnerable to both US import restrictions and Chinese market distortions – and the current trajectory suggests more pain than gain.

• 5. Finance and Professional Services (Mixed) – While services are not directly subject to tariffs, the UK’s huge financial and business services sector will feel second-order impacts of trade wars. London is a global financial hub; heightened US-China tensions could redirect financial flows in ways that affect the City. For example, if Chinese firms are barred or discouraged from raising capital in New York, they might turn to London or Hong Kong, potentially giving London’s financial services a boost (as an alternative venue). Indeed, a protracted standoff might make London relatively more attractive for certain international listings or as a neutral financial jurisdiction. The UK has already seen an influx of Chinese companies on its stock exchange and Chinese capital in real estate; this could grow if US markets are hostile to Chinese money. However, there are offsetting negatives: global trade wars dampen economic growth, which is bad for financial activity and investment generally. A slump in global trade could hurt UK banks’ corporate lending and reduce assets under management for investment firms (because of lower corporate earnings). Additionally, the UK is trying to maintain ties with both the US and China – it may come under pressure from the US to restrict Chinese access to its financial system (similar to how the US pushed the UK to ban Huawei from 5G). If the UK aligns more with the US, it might voluntarily limit Chinese listings or enforce financial sanctions, which would remove any advantage London might have gained. Beyond finance, other service sectors like higher education and tourism could be impacted: Chinese student enrollment in UK universities (a significant revenue source) might fall if relations sour dramatically or if China discourages overseas study in countries seen as unfriendly. Likewise, tourism from China (and even from Europe if there’s an economic downturn) could drop, affecting hospitality. On the positive side, the UK could leverage trade tensions to its benefit in some niches – for instance, offering trade finance, insurance, or legal arbitration services for countries looking to navigate around US sanctions or tariffs. London’s role as a global legal/arbitration center might expand as companies grapple with new trade barriers and need dispute resolution. Overall, this category (services) is mixed: not a clear “winner” or “loser,” but important to mention since it’s large for the UK. The health of UK services will depend on how extreme the trade breakdown becomes. If it remains mostly goods-focused, UK services might ride it out with minor bumps (and possibly some capital flow opportunities). If it escalates to financial decoupling, the UK will have to choose sides, which could either open niche markets or cut off others.

Summary (UK): The United Kingdom’s open, export-oriented sectors (like whisky, autos, aerospace, and metals) stand to lose in a 2025–26 trade war environment. The UK doesn’t gain much from US protectionism (since UK exports compete on quality, not sheer volume), and it lacks the economic weight to retaliate effectively. Thus, it risks being squeezed between larger powers. There may be a strategic opportunity for the UK to broker deals – for example, pushing for a US-UK free trade agreement to exempt it from the worst tariffs, or acting as a mediator between the US and EU to resolve disputes (as it is no longer in the EU, it could play an intermediary role). The UK will also likely accelerate its trade diversification: joining the CPTPP (Asia-Pacific trade pact) is one step, and pursuing closer ties with fast-growing economies (India, GCC countries) is another, so that it’s less reliant on the US/EU/China triangle. Nonetheless, for 2025–26, the UK’s best hope is to avoid being targeted and to mitigate damage where possible. Its top sectors are mostly in the line of fire indirectly, so UK policymakers will be keen to ensure exceptions (e.g. get whisky and autos off the US tariff list) and to keep communication channels open. Without such efforts, the UK could end up one of the notable losers of a new trade war despite its political alignment with Washington.

European Union: Key Affected Sectors

The European Union, particularly major economies like Germany, France, and Italy, faces significant exposure to both US and Chinese trade actions. The EU’s trade surplus with the US made it a target in Trump’s first term (though the full brunt of auto tariffs was delayed), and the EU’s large two-way trade with China means it can be pinched from both sides. Under a Trumpist escalation, the EU might confront US tariffs on a wide range of goods, forcing it to retaliate, all while trying to maintain trade with China amid US pressure. Europe’s strategy has been to call for multilateral rules and “strategic autonomy,” but if confrontation reignites, several key sectors will be on the front lines:

• 1. Automotive (Negative) – The automotive industry is often cited as Europe’s most vulnerable sector in a US-EU trade war. The EU exports a high volume of cars to the US (about €46 billion worth in 2024) , dominated by German luxury brands (BMW, Mercedes, Audi) and Volkswagen Group models. President Trump has long decried this imbalance and as of 2025 has pushed through a combined 45% tariff on European vehicles (the 25% auto tariff plus an additional across-the-board 20% tariff) . Such a duty level is essentially prohibitive – EU automakers would be priced out of the US market. Analysts warn this could cause a “near-total collapse” of European car shipments to America . The scale of impact is massive: the US is one of Europe’s top auto export destinations, and a collapse in those exports would hit Germany particularly hard. Germany’s car sector (and hubs in Slovakia, Hungary, etc., which produce components and assembled cars for export) could face recession-like conditions . Jobs would be at risk not only in manufacturing plants but throughout the supply chain (metal parts, electronics, engineering services) concentrated in Central Europe. European carmakers do have some US production (BMW and Mercedes have plants in the US South; VW in Mexico), which could cushion the blow slightly by allowing them to still serve the US market from inside the tariff wall. But those facilities might need to expand dramatically, and investment for that could be hard to justify amid uncertainty. Meanwhile, retaliation and other markets: The EU would likely respond to US auto tariffs with its own tariffs on US goods (though since the EU imports fewer American cars, it might target other goods – possibly American agricultural or tech products). Additionally, China could seize the opportunity to favor European cars if US cars become embroiled in a China dispute. Indeed, during the earlier US-China trade war, German automakers benefited somewhat because China cut auto import tariffs generally and US-made cars were tariffed extra – meaning Chinese consumers could more easily buy a BMW from Germany than a Cadillac from the US. However, any such gains were marginal compared to the potential loss of the US market. On top of tariffs, non-tariff issues lurk: US security concerns about connected cars or EV batteries could impose new barriers (for instance, if the US required removal of certain Chinese-made electronic components from imported cars, that affects German cars too). In sum, the EU auto sector stands to lose tens of billions in exports and could see significant production downturns. Interdependency here is strong: not only are EU and US manufacturing linked (European factories ship parts to their US subsidiaries and vice versa), but European economies (Germany especially) are deeply tied to auto exports as an engine of growth . Europe might try strategic responses like shifting more production to the US (to bypass tariffs) or focusing more on emerging markets (China, where EU EVs are trying to grow, or other regions). But those are long-term plays. In the near term, auto is a clear loser for the EU, which is why Europe has been extremely wary of US auto tariffs – a hit of up to €85 billion in lost exports overall is estimated if broad tariffs take effect , with cars the biggest chunk of that.

• 2. Pharmaceuticals & Chemicals (Negative) – Pharmaceuticals are the EU’s single largest export category to the US (covering medicines, vaccines, etc.), reflecting Europe’s strong pharma industry (think companies like Novartis, Bayer, Sanofi) . Traditionally, medicines have not been high on tariff lists due to their essential nature, but Trump’s mooted 20% blanket tariff includes pharmaceuticals . If enacted, this would be a significant blow: European pharma exports to the US (worth many tens of billions of euros annually) would become far less competitive, potentially ceding market share to US or other suppliers. Even a short-term tariff could disrupt supply chains for critical drugs (many of which are made in Europe and consumed in the US). Beyond tariffs, Trump has criticized high drug prices and could use trade policy (or procurement policy) to pressure European pharma firms to lower US prices, indirectly hitting their margins. The scale: applying 20% duties on €382 billion of EU goods to the US would reduce exports by ~€85 billion , and pharma is a big piece of that. Countries like Ireland, Germany, and Denmark (major drug exporters) would feel the hit . In chemicals (including plastics), which is another big EU export category, similar tariff impacts would be felt – many chemical companies operate in both regions, but tariffs could cause supply rerouting and inefficiencies. Interdependence: Notably, the EU also imports a lot of pharmaceuticals from the US. The EU could retaliate with tariffs on American pharma, but that would raise healthcare costs in Europe – a politically sensitive move. So, both sides have reasons to be cautious in this sector. Still, in a no-holds-barred trade war, pharma might not be spared, and Denmark’s economy (with big pharma like Novo Nordisk) or Belgium’s (vaccine production) could suffer outsized effects . Strategically, pharma firms might accelerate localizing production – e.g. European companies expanding factories in the US to ensure supply, and vice versa. But regulation and R&D concentration mean this can’t change quickly. Thus, the EU pharma and chemical sector would likely see lower exports and possible supply snags, a clear negative economically. The only consolation is that tariffs on medicines might be among the first to be lifted if negotiators decide it’s mutually harmful (akin to a ceasefire because both need medicine flows). Until then, Europe’s most valuable exports are at risk, highlighting how a trade war can reach even high-tech, previously untouchable sectors.

• 3. Machinery & Industrial Equipment (Negative) – Europe (notably Germany and Italy) is a leading exporter of machinery, industrial equipment, and precision instruments. These range from factory machines and tractors to medical devices and power turbines. The US and China are both major buyers of EU machinery. Trade tensions threaten this sector on multiple fronts. On the US side, broad tariffs (say 10–20%) on industrial goods would make European machinery more expensive for American manufacturers who rely on it. Some US firms might switch to domestic or Japanese alternatives, hurting European suppliers. On the China side, if Europe aligns more with the US or if China decides to favor non-Western suppliers, European machinery makers could lose ground in China as well. We’ve already seen hints of this: in recent years, China’s Belt and Road projects have sometimes sourced machinery from China or friendly countries instead of Europe if political relations fray. While current EU-China trade is still robust, a general decoupling atmosphere could dent new orders. The scale is significant because machinery is a top export for countries like Germany – any slowdown in global capital investment due to trade uncertainty will reduce demand for European equipment. Also, EU firms often have production plants in the US (to be closer to customers and avoid past tariffs); companies may double down on that, effectively moving some production out of Europe. That’s a loss of output for the EU itself. Interdependency is again key: much of the advanced machinery has components from multiple countries (for example, a German CNC machine might use electronics from Asia and software from the US – disruptions in tech trade or export controls on chips could hamper the product). Europe could also face indirect competition if US-China tariffs cause Chinese machinery to flood other markets at lower prices (e.g. Chinese manufacturers, shut out of the US, might aggressively bid for projects in Africa or Latin America, undercutting European bidders). Strategic adjustment for EU machinery makers might involve shifting focus to more resilient markets (within the EU or regions not in the fray) and emphasizing service and maintenance (which are less tradable) to keep revenue. In conclusion, a trade war scenario is broadly negative for Europe’s industrial machinery sector as it curtails two major export avenues and complicates supply chains, likely leading to reduced output and possibly layoffs in manufacturing hubs.

• 4. Aerospace & Defense (Mixed) – Europe’s aerospace sector (Airbus and its supply chain) could see both upsides and downsides in a US-led trade war. Upside: As discussed, Airbus has been a beneficiary of US-China conflict – with Boeing hobbled, Airbus secured big orders from Chinese airlines . If the US-China rift deepens, China will remain inclined to buy from Airbus (EU) rather than Boeing (US). That could mean a larger market share for Airbus in China for years to come, filling European order books and sustaining jobs in France, Germany, Spain, and also the UK. Additionally, if a Trump administration is hostile to the EU, Airbus might double down on selling to the rest of the world (Asia, Middle East), positioning itself as a less politically encumbered supplier than Boeing. Downside: However, if Trump unleashes tariffs on the EU, he could maintain or raise the tariff on Airbus aircraft imports to the US (which was 10% ). This would hurt Airbus’s competitiveness for US airline orders. US airlines might delay purchases or buy Boeing instead due to cost. Since the US is a key market (though smaller than Asia), Airbus stands to lose some sales. Moreover, the earlier Airbus-Boeing dispute saw the EU impose tariffs on US aerospace (e.g. parts, planes); a breakdown could bring that back, making it costly for European airlines to buy Boeing or even to source certain US-made aerospace components. European aerospace firms like Airbus and Dassault also rely on certain American technologies (avionics, engines in some cases) – if tech trade controls tighten, it could disrupt production. On defense, a confrontational Trump might pressure Europe to buy more American weapons (under NATO spending arguments), which could hurt European defense contractors. Or conversely, Europe might push for more “Buy European” in defense to assert autonomy (which the EU has been discussing). It’s complex, but broadly, civil aerospace in Europe might net out neutral or slightly positive because the China market advantage could outweigh the US market disadvantage in volume, at least in the short term. And any resolution between US and EU on the subsidy dispute by 2026 would remove the US tariff on planes, restoring equilibrium. If relations worsen, though, one could see a bifurcation where Airbus becomes the plane supplier for “the rest” and Boeing for the US and maybe its closest allies – not an ideal outcome for global efficiency, but potentially giving Airbus a locked-in customer base across non-US aligned countries. Strategically, Airbus is already increasing production in Mobile, Alabama (US) to mitigate tariff exposure – more of that could happen, effectively moving some jobs to the US but preserving sales. Net: Europe’s aerospace sector has a cushion due to Boeing’s troubles, but it must navigate carefully to avoid losing the US market, making this sector a mix of opportunity and risk under trade war conditions.

• 5. Luxury Goods & Consumer Products (Mixed) – Europe is home to many luxury and consumer brands (fashion, apparel, cosmetics, wine, furniture, appliances) that thrive on global trade. A trade war can reshape their fortunes in various ways. For example, fashion and luxury goods: The US threatened and sometimes imposed tariffs on European luxury products (designer handbags, apparel) during disputes; likewise, the EU targeted iconic American consumer goods (jeans, motorcycles). If tariffs escalate, European luxury houses (like LVMH, Gucci) might face duties in the US, making their products pricier for American consumers. The US is a huge market for high-end European goods, so this is a concern. However, these brands often have pricing power and wealthy clientele less sensitive to price hikes; they might weather moderate tariffs. Chinese consumers are actually even more crucial for many European luxury firms (often 30-40% of global luxury sales). If Europe remains on relatively good terms with China (not joining a full sanctions regime), Chinese consumers may continue to favor European brands, potentially making Europe a winner in the China market as American brands (like certain US fashion labels or even cultural products) fall out of favor due to nationalism. We saw hints of this when Chinese public boycotts hit some American brands; European brands sometimes filled the gap. However, if Europe sides closely with the US, China could retaliate by boycotting European luxury as well (as happened briefly when some European firms spoke up on human rights issues). That would be a major blow to that sector. On balance, European luxury firms likely benefit from US-China tensions if Europe is seen as a neutral party, but would suffer if caught in between. For broader consumer goods like appliances or food: the 2019 US tariffs hit items like French wine, Italian cheese, olives, and British biscuits . Those had real impacts (French wine exports to the US dropped, etc.). Renewed tariffs would hurt Europe’s SME food producers and farmers – a negative for EU agribusiness (particularly in France, Italy, Spain). Some diversification is possible (finding other markets for wine, or EU consumption), but losses are likely. European appliance and electronics brands (like German home appliances, Swedish furniture, etc.) could also lose US sales to tariffs. Conversely, European consumers might face higher prices or shortages of certain American goods if the EU retaliates (e.g. tariffs on U.S. tech or agricultural imports), but Europe is more self-sufficient or has alternate suppliers in many consumer categories, so that is less a sector issue and more a consumer inflation issue. Net for this category: Europe’s consumer and luxury goods sector is large and somewhat diversified. Trade war would create pockets of pain (wine, cheese exporters, etc.) and some potential gain (Chinese demand steering to EU brands). Many companies would seek to mitigate by moving distribution centers or using e-commerce channels creatively (for example, shipping from EU to consumers directly to avoid tariffs via third countries, though that’s limited). The sector’s fate will also depend on currency movements (trade wars often weaken currencies; a weaker euro could actually help EU exports to non-US markets). It’s a mixed bag, but since we focus on top impacts, the inclusion here is to note that beyond heavy industry, Europe’s distinctive consumer products are on the line as well – e.g., the French wine industry dreaded those 25% tariffs which threatened a significant chunk of their U.S. sales .

Summary (EU): The European Union stands to lose heavily in a generalized trade war, with autos and industrial exports taking the brunt. Estimates suggest broad US tariffs could cut EU exports by at least €85 billion , which would have ripple effects on jobs and investment in export-driven regions. While Europe might gain some relative advantage in China vis-à-vis American competitors (notably in aerospace and perhaps luxury goods), this is small consolation if the US market largely closes. The EU’s approach will likely be twofold: retaliate firmly but target it smartly (e.g. hit politically sensitive US goods to force negotiation, as they did with bourbon and motorcycles, while trying not to hurt themselves more) and seek alliances. Europe may deepen trade ties elsewhere (accelerating trade agreements with Australia, India, Mercosur, etc. to open markets for its exporters) to compensate for US losses. There is also talk of EU industrial policy – supporting affected sectors with subsidies or shifting focus to internal EU demand. If China remains open to Europe, EU firms will try to expand there, although the EU is also increasingly wary of dependency on China. Ultimately, the EU would strongly prefer to avoid a two-front trade war; it might try to negotiate separately with Trump to stave off tariffs (perhaps by offering to discuss EU car tariffs, which are 10%, or working on WTO reforms to address some US grievances). In a scenario where diplomacy fails, the EU economy would face a serious growth challenge, with its export powerhouse sectors under siege. Some countries (Germany, Ireland, Netherlands) would be harder hit than others (like less export-dependent Southern economies), but as a bloc the EU would likely enter a slower growth trajectory. The one possible “winner” within the EU could be any sectors that manage to fill voids in either the US or China markets due to others’ absence – for instance, European soy farmers (though few) selling more to China if US soy is tariffed, or Airbus gaining sales because Boeing can’t. Yet these do not offset the broad losses. Thus, Europe’s overall stance is defensive: minimize damage and leverage unity (the EU acting as one is more formidable against US pressure than individual countries alone).

China: Key Affected Sectors

China’s economy, the second largest in the world, has been a primary target of US trade actions. The 2018–19 trade war and subsequent tech sanctions were aimed squarely at China’s export machine and technological ascent. China absorbed the initial shock by redirecting trade and stimulating its economy, but a re-intensified conflict will test its resilience further. Chinese policymakers have pursued a “dual circulation” strategy – boosting domestic demand while remaining a trading hub – to cope with decoupling. In 2025–26, if Trump (and possibly US allies) escalate measures, China will see pain in export-oriented sectors but may also experience some strategic gains in self-reliance. Here are the top sectors in China likely to be most affected:

• 1. Electronics & Technology Manufacturing (Negative) – This is China’s flagship sector: the country is the world’s manufacturing base for electronics, from smartphones and PCs to telecom gear and appliances. US tariffs and export bans directly strike at this sector. Already, the 2018–19 tariffs covered a broad range of Chinese electronics and electrical equipment – everything from circuit boards to consumer devices – causing a wide range of tech products (smartphones, laptops, TVs, etc.) to face higher costs in the US . Chinese firms often had to cut prices (eating the tariff cost) to stay competitive, hurting their margins. A renewed trade war likely means all Chinese ICT and electronics exports to the US face heavy tariffs (25% or more). This would further reduce Chinese electronics sales in the US (which have already fallen; for instance, Chinese exports to the US were down ~12.5% in 2019 in value , reflecting these tariffs). Companies have been adapting by relocating assembly to Southeast Asia – e.g., many Taiwanese and Chinese electronics manufacturers moved some operations to Vietnam, Thailand, or Mexico to bypass tariffs. That trend will accelerate, effectively hollowing out some electronics assembly jobs from China. However, the sophisticated part of the supply chain (components, sub-assemblies) often still originates in China, so China tries to hold onto higher value-add steps while letting low-end assembly migrate. Another blow to this sector is the US export controls on semiconductors and tech: Chinese tech manufacturers have difficulty obtaining the latest chips and equipment due to US restrictions (with EU and Japan alignment). This hampers China’s ability to produce cutting-edge devices (like advanced smartphones or servers), possibly putting its firms behind competitors. For example, Huawei, once a top smartphone maker, saw its global market share plunge after US sanctions cut off its access to 5G chips. On the scale side: electronics is one of China’s largest export categories (hundreds of billions of dollars). Losing even a portion of the US market or facing lower prices due to tariffs is a big loss. The Chinese government is responding by pouring investment into domestic chip fabs and tech R&D to reduce reliance on Western inputs. In the near term, though, most Chinese tech firms face a negative outlook if decoupling deepens – weaker export sales, potential supply chain disruptions, and forced strategic pivots (like focusing only on domestic or emerging markets). On the positive side, China’s large domestic market can absorb some of the output (e.g., if fewer Xiaomi phones sell in the US, Xiaomi can try to sell more affordable phones domestically or in India/Africa). Also, if US companies are restricted from China, Chinese tech firms may capture more share at home: for instance, Apple’s position in China could weaken if nationalistic sentiment or regulations favor homegrown brands, benefiting companies like Huawei or Xiaomi domestically. Thus, consumer electronics makers might lose abroad but gain at home. Still, given how export-heavy this sector was built to be, overall it’s a net loser. We should also note telecom equipment: companies like Huawei and ZTE face not just tariffs but outright bans in the US and some allies, cutting them off from many lucrative 5G markets (UK, Australia, etc. followed the US lead in banning Huawei 5G gear). They’ve refocused on China and friendly markets, but global revenue is down. Unless geopolitical climate improves, China’s advanced tech hardware sector will continue operating below its potential, making this sector one of the prime casualties of the trade war.

• 2. Electrical Appliances & Consumer Goods (Negative) – Beyond high-tech, China is a massive exporter of mid-level manufactured goods: home appliances (air conditioners, washing machines), lighting, furniture, toys, apparel, footwear, and so on. These “everyday goods” were a big part of the later rounds of US tariffs. For example, List-4 tariffs proposed in 2019 would hit clothing, shoes, and consumer goods heavily . In a full escalation, the US will tax essentially all such goods from China. The impact is that Chinese products become more expensive in the US, leading importers to switch suppliers where possible. Already during the first trade war, we saw supply-chain re-routing: Vietnam, Bangladesh, and others saw surging exports to the US as companies sourced apparel, footwear, and low-end electronics from those countries instead of China . For instance, Vietnam’s exports to the US jumped by double digits, making it one of the biggest winners of the US-China trade war . This trend will deepen, meaning China could permanently lose portions of market share in these labor-intensive sectors. Factories in China might downsize or relocate to Southeast Asia to remain competitive. This is a loss of jobs in China’s coastal manufacturing hubs (though some were already moving inland or upgrading to higher-end production). Interdependencies: Interestingly, some of the “loss” is partly on paper: investigations found that a portion of Chinese exports were re-labeled as from Vietnam or others – essentially transshipment or minor processing to dodge tariffs . China might continue such strategies to keep supplying the US via third countries, but the US is likely to crack down. For consumer goods that are hard to replace (e.g., if China dominates the supply of some toy or holiday lights), US consumers will just pay more – which doesn’t benefit China per se, unless Chinese firms keep volume and accept smaller margins. For apparel and textiles, China has already lost a lot of share to countries like Bangladesh and Vietnam due to cost factors, and tariffs hastened that. We can expect further relocation of textile supply chains out of China. However, China might compensate by moving up the value chain (more technical textiles, brand development, or focusing on its domestic fashion market which is huge and growing). Another aspect: China’s domestic market for these goods is huge. If exports drop, some Chinese companies pivot inward or to other developing markets. For example, appliance makers like Haier or Hisense can try to sell more in Asia, Africa, or South America to make up for US sales. And Chinese consumer demand, while not as strong as before, is still significant. So the sector’s output might not collapse; it will be reoriented. Nevertheless, in terms of trade, this sector is a net loser for China – it was China’s bread and butter to supply the world with affordable consumer goods, and that model is under threat. Strategically, the Chinese government likely accepts the shedding of some low-end export industries as the cost of moving the economy upscale. The immediate pain would be in employment for low-skilled workers, which is a domestic concern (could contribute to unemployment or lower wages in certain regions). China may respond by stimulative policies (e.g. infrastructure projects) to absorb those workers, effectively using fiscal tools to offset trade job losses. In conclusion, China’s consumer goods export sector will shrink in importance, and while that aligns with China’s long-term goal to not be just the world’s workshop, in the short run it’s an economic hit and forces a lot of industrial adjustment.

• 3. Industrial Machinery & Capital Goods (Negative) – China not only makes final consumer goods; it’s increasingly a supplier of machinery and capital equipment to developing countries. However, for exports to the US/EU, Chinese machinery is often seen as lower-tech, and Western importers prefer domestic or allied suppliers for advanced equipment. In a trade war context, Chinese capital goods (like electrical equipment, railway equipment, construction machinery) exported to the US would face tariffs, making them less competitive. The US doesn’t import as much machinery from China as it does consumer goods, but it’s still significant (think of things like power tools, factory gear, etc.). More critically, Chinese companies might find it harder to import certain high-tech components for their own machinery production due to Western export controls (for example, high-end machine tools, precision instruments). That could slow China’s move upmarket in machinery. Another angle: If China is cut out of the US market, it might double down on markets in Asia, Africa, and Latin America, often via the Belt and Road Initiative (BRI). Indeed, part of China’s strategy is infrastructure diplomacy – lending to countries so they buy Chinese trains, generators, telecom networks, etc. A hostile US could push some countries to avoid Chinese infrastructure (for security or to curry favor with the West). We’ve seen examples: some countries reconsidered Chinese 5G or rail projects under US pressure. On the other hand, others still welcome Chinese tech if it’s cost-effective. Interdependency: China also imports a lot of specialized machinery from Europe/Japan. If tech war escalates, those flows could be restricted, forcing China to try self-producing more. In the short term, that’s a bottleneck (leading to lower productivity until they catch up). So sectors like semiconductor fabrication equipment are a huge pain point – China currently cannot make the most advanced lithography machines and relies on Dutch and Japanese suppliers, who are now aligning with US export curbs . Without those, China’s equipment manufacturing sector (for chips) is hamstrung, affecting all downstream tech manufacturing. This is partly why we see a massive government push for indigenous innovation and machinery in China. Until that succeeds, the industrial equipment sector faces challenges. Net effect: Negative for now – slower growth, maybe contraction in output aimed at US/EU markets, offset partially by domestic and Global South demand. Over the medium term, this pressure could yield a more self-sufficient Chinese industrial tech base (e.g., China developing its own CNC machine industry to replace German/Japanese imports). That would be a strategic win for China (and a long-term competitive threat to Western firms), ironically spurred by the trade war. But 2025–26 is too soon for those efforts to fully fructify, so initially expect reduced efficiency and some gaps in China’s industrial supply chain due to decoupling.

• 4. Automotive (Mixed/Negative) – China’s auto sector is twofold: a huge domestic market (the world’s largest, with foreign brands and local brands competing) and a growing export ambition, particularly in electric vehicles (EVs). Trade wars affect both dimensions. On the export side, Chinese automakers have recently begun exporting cars globally at scale – especially EVs (for instance, brands like BYD, SAIC, and Great Wall are exporting to Europe, and Tesla’s Shanghai factory exports to Europe/Asia). If the US remains hostile, Chinese car exports to the US are minimal anyway (due to 25% US auto tariff that long predates Trump, plus additional tariffs on China now). So China doesn’t lose much directly in US market (they were not major players there yet). Europe, however, is a target for Chinese EVs, and the EU in 2023 launched an anti-subsidy probe into Chinese EV imports, potentially leading to tariffs. If a US-led trade hard line extends to allies, Chinese autos could face higher barriers in the West. This would be a setback for China’s auto industry global plans (they’ve been making inroads – e.g., MG, a Chinese-owned brand, is selling well in Europe). On the domestic side, trade tensions can have a couple effects: If US and European automakers are viewed as unreliable or face any sanctions, Chinese consumers or regulators might tilt toward domestic brands. For example, during past political spats (THAAD dispute with Korea, or anti-Japan protests), Chinese consumers boycotted foreign cars, boosting local makes. In a prolonged US-China cold war, it’s plausible the Chinese government will promote “buy Chinese cars” as part of self-reliance. Already, Chinese EV makers are very competitive at home, and foreign automakers’ market share in China is declining. A nationalist climate could accelerate that – making Chinese auto companies winners at home. But the flip side is foreign investment or tech cooperation might wane; for years, joint ventures with Western firms helped Chinese car companies upskill. If those partners (like GM, VW, Toyota) cut back investment due to tensions, Chinese firms might lose some access to cutting-edge tech or be cut off from certain advanced chips for smart cars (if classified as sensitive tech). Additionally, if Europe/US restrict exports of certain automotive chips or software (like advanced AI chips for autonomous driving), Chinese cars might lag in those features. However, China could turn to domestic suppliers (like Huawei is pivoting to auto components). On scale: the auto sector is huge for jobs and industrial output in China. Domestic sales are far more important than exports at the moment, so maintaining a strong home market is priority. By shielding its market (China has its own tariffs and rules that favor local EVs with incentives), China might manage to have its auto industry continue growing even as global fragmentation occurs. If Chinese EVs are kept out of West, they will push more into Asia, Africa, Latin America where Western EVs are scarce. We see Chinese cars becoming popular in developing markets (often beating second-hand imports on price). So Chinese auto sector might still succeed regionally, if not in US/EU. Interdependency note: Many “Chinese” EVs actually use foreign parts (battery tech has a lot of South Korean/Japanese input, car design sometimes by European studios, etc.). Decoupling could make it harder to get some of those inputs, but China’s ahead in certain areas like battery manufacturing (CATL, BYD are world leaders), so they have some leverage (Europe depends on Chinese EV batteries, interestingly). In summary, China’s auto sector is moderately hit – lost potential in Western markets, but potential gains at home as foreign rivals are handicapped. It’s somewhat mixed: traditional gasoline car exports are not a big thing for China (and were tariffed by China itself at times to retaliate US), while EVs are a rising export where trade barriers could slow their momentum. The net near-term effect likely negative (less export growth than hoped), but not crippling. Long-term, if Chinese autos can dominate developing markets and their own, they’ll still become formidable.

• 5. Metals & Energy (Mixed) – China’s metals industry (steel, aluminum) and energy commodities trade also come into play. The US steel and aluminum tariffs were largely aimed at China’s overcapacity (though applied globally). China’s direct steel exports to the US were already limited (US had duties on Chinese steel pre-2018), so those tariffs didn’t hit China as much as they hit others. However, indirectly, China’s steel glut and trade war responses can shake global prices. In retaliation for US tariffs, China could impose tariffs on US metals (it did on aluminum scrap and some other things), which hurt some US industries. But more interesting is rare earth metals – China controls the majority of rare earth mining and processing, critical for high-tech and defense. In a serious conflict, China might restrict rare earth exports to the US/EU, as it has hinted in the past. This would hurt certain tech and automotive sectors in the West (which need rare earth magnets for motors, etc.), but it also would hurt China’s rare earth miners who lose sales. Still, as a coercive tool, China might use it. That makes rare earth mining outside China (like in the US or Australia) a suddenly strategic, potentially benefiting those competitors. For energy, China is a huge importer of oil and gas. During the trade war, China put tariffs on US LNG and oil, effectively cutting US energy imports . US exporters lost some market share (which went to Middle East or Russia). In a decoupling scenario, China will continue to source energy from non-US suppliers – this can actually be advantageous because it diversifies China’s supply (they’d rather not depend on US anyway) and often at competitive prices. For instance, after 2018, China bought virtually zero US soy and energy for a while, and found alternatives. The downside is China might pay a bit more or have less efficient sourcing (e.g., shipping from further away). Also, any US sanctions on oil (like on Iran or Venezuela) put China in a diplomatic bind, but China has been skirting US sanctions to get discounted oil. If geopolitical blocs harden, China could deepen energy ties with sanctioned states (Russia, Iran) – giving it cheaper input but potentially reducing flexibility. Coal and solar: Trade wars also touched solar panels – the US tariffs on solar hurt Chinese panel makers in the US market, but Europe/others still buy plenty. China’s renewable energy manufacturing (solar, wind) is strong; a positive is that Western climate policies still rely on cheap Chinese green tech, which even tariffs can’t fully impede due to cost needs. But if they try, those Chinese sectors would seek other markets (developing countries pushing solar). Overall, metals/energy for China is a mixed bag: steel/aluminum find other markets (or domestic use via China’s infrastructure spending), but global gluts mean low margins – not a winning sector, but not due just to trade war. Rare earths and critical materials give China some leverage – they could cause pain to US/EU by withholding, though at a cost to themselves. Energy imports shifting away from US has minor negatives (some lost efficiency or tech collaboration on LNG, etc.) but China adapts. One noteworthy internal effect: if trade war drags global growth down, commodity prices might slump, which reduces China’s import bill for oil/iron ore. That could actually improve China’s terms of trade (cheaper inputs). In fact, in 2019, slower world demand helped lower China’s input costs even as exports fell, somewhat balancing out. So macro-wise, there are moving parts.

Summary (China): China’s economy would face significant headwinds in export-focused sectors – electronics, consumer goods, machinery – under an escalated trade war. Estimates show China’s exports to the US dropped sharply (by double digits) when tariffs were imposed , and full decoupling could remove a chunk of the roughly $500+ billion/year trade. However, China has shown agility in diversifying its trade partners and stimulating domestic demand to offset external losses. During the initial trade war, despite export declines, China’s GDP growth only dipped modestly (to about 6.1% in 2019, a 29-year low but not a crash ) thanks to infrastructure spending and other stimulus. We can expect similar countermeasures: government support for affected industries, subsidies to move up the value chain, and aggressive pursuit of alternative markets via initiatives like RCEP (Asia-Pacific trade pact) and the Belt and Road. In the long run, the pressure to decouple is forcing China to innovate – building its own semiconductor, aerospace, and software capabilities. In 2025–26, those efforts are nascent, so the short-term impact is more negative (constraining growth). But China might accept slightly lower growth as the price for greater economic independence. If Trump’s trade war goes global, China may also deepen alignment with other non-Western powers (forming a bloc for trade in which China is central – we see hints of this with BRICS expansion, etc., positioning China to lead alternate economic networks). In terms of winners within China: sectors oriented to domestic consumption or Asia/Africa markets will fare better. Also, some Chinese firms that compete with Western imports at home could gain (if US/EU products face tariffs or boycotts in China, local brands gain share). Losers are primarily exporters and firms reliant on US-origin technology. The Chinese state stands ready to bail out or prop up strategic losers (like chip companies) because it views reducing reliance on US tech as a national security imperative. Thus, ironically, a trade war might strengthen the role of the Chinese state in the economy (more subsidies, more state-driven tech programs) and push China further from the free-market model the US might prefer it adopt. In the near term, Chinese growth would slow and certain industries suffer layoffs, but Beijing’s capability to manage economic stability (capital controls, state banks, etc.) means a crisis is unlikely. No clear “winner” emerges for China either – it’s about damage control and turning adversity into impetus for reform. As Chinese officials often say, they view the US trade war as an attempt to contain China’s rise , and their response is to double down on self-reliance and partnerships outside the US orbit.

The multifaceted impacts across the US, UK, EU, and China are summarized in the table below, highlighting the top affected sectors in each region, the general direction of impact, and key drivers of those outcomes.

Legend: 📉 = negative impact, 📈 = positive impact (if mixed, both may apply).

This comparative analysis underscores that no region emerges unscathed in an all-out trade war. The United States may succeed in reducing its trade deficits and bolstering a few protected industries, but at the cost of higher consumer prices and distress in export sectors like farming and aerospace. The United Kingdom, lacking economic heft in such disputes, finds itself a bystander hurt by the fallout on key exports (whisky, cars) and reliant on alliances to shield its interests. The European Union likely faces the most significant absolute trade losses given its large export volumes, especially in autos and pharma, and would need to scramble to substitute markets and double-down on EU internal demand. China will experience accelerated losses in its traditional export sectors but will try to compensate through state support and tapping into other markets, hastening its economic pivot inward and toward Global South partnerships.

A consistent theme is the interdependence of these economies: supply chain links mean a tariff in one place reverberates through others. For instance, tariffs on EU auto parts hurt US carmakers, and sanctions on Chinese tech hurt US component suppliers. All four regions are thus incentivized, from a pure economic standpoint, to avoid escalating trade conflicts. However, political drivers may override these costs, leading to a scenario where each bloc accepts short-term pain for perceived long-term gain or strategic goals. In such a case, we would likely witness a continued realignment of global trade: North America and Europe trading more within a like-minded circle, China trading more with emerging Asia/Africa and leaning on self-reliance, and the UK attempting to bridge ties where possible.

In conclusion, the winners in a trade war are at best relative or temporary – e.g. one country’s farmers gain because another’s are tariffed, or one airplane maker benefits from the other’s sanctions. The overarching outcome, as experts note, is that these trade wars are a “lose-lose” proposition for the global economy . Open trade tends to raise all boats, whereas protectionism and tit-for-tat tariffs create more losers than winners across all major regions, as evidenced by the sector-by-sector impacts detailed above. Each region will have to employ strategic adjustments (such as diversification of supply chains, new trade alliances, and domestic investment in affected industries) to mitigate the damage if such trade wars persist into 2025–2026.