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A new Allianz Trade report predicts that the administration of US President Donald Trump could take a harder line on trade after the midterm elections set for November, potentially intensifying trade wars at a time when protectionist measures and tariff uncertainty already weigh on global commerce.

The "Economic Outlook 2026-2028" report, compiled by an Anadolu Agency correspondent, sees global trade being reshaped by geopolitical tensions, energy supply disruptions and protectionist policies, with downside scenarios pointing to an average tariff rate of as much as 21.3%.

Tariff risks after the midterms

US tariffs and weak domestic demand in China are pushing Chinese exporters to redirect sales toward Europe and the Global South, the report said. That shift is increasing China's weight in global supply chains and creating what the report calls a "China shock 2.0" that is putting pressure on European economies.

Europe is caught between competitive pressure from rising Chinese imports and shrinking export opportunities caused by US tariffs. Export losses linked to those tariffs amounted to $74 billion in 2025 and are expected to reach $42 billion in 2026, according to the report.

The main risks it lists are new tariffs targeting China's industrial overcapacity, fresh investigations into the rerouting of Chinese goods through third countries, and continued trade friction with Canada. Under adverse scenarios, the average customs tariff rate could climb to 21.3%.

AI demand adds 4.8 points to trade growth

Global merchandise trade grew 4.7% by volume in 2025, and the report expects growth to ease to 4% in 2026 and to 2.9% in both 2027 and 2028. Rising demand for artificial intelligence technologies is forecast to add 4.8 percentage points to merchandise trade growth this year, while European defence spending contributes 0.2 points and carry-over trade volume adds 1.4 points.

Counting in the other direction, the closure of the Strait of Hormuz would take 2.1 points off global trade growth and continuing trade wars 0.4 points. The report notes that the strong support from AI-related demand is masking divergence in the global economy, with world trade splitting into two tracks moving at different speeds.

AI-linked demand is expected to remain the largest single support for trade growth in 2027 and 2028, although its contribution falls to 1 point. US tariffs are forecast to subtract 0.3 points from global trade growth in 2027 as they continue to disrupt existing supply chains. Free trade agreements signed over the past 12 months should start contributing measurably to exports from 2027, adding about 0.1 points a year, with the European Union, India, Mercosur countries, the United Arab Emirates and Australia seen as the main beneficiaries.

Asian exporters benefit from supply chain shifts

Supply chain diversification and demand for AI technologies are supporting export performance across Asia-Pacific economies, with countries embedded in AI supply chains standing out. Demand for semiconductors and other AI inputs lifted South Korean exports by 10.5% year on year and Taiwanese exports by 30%, the report said.

Mexico, Vietnam and Malaysia are profiting from supply chain diversification, while the United States and the Netherlands lead among advanced economies. The Asia-Pacific economy is projected to grow 4.4% in 2026, with roughly 25% of that expansion coming from AI investment. In Taiwan, South Korea, Malaysia, Thailand and Singapore, close to 60% of economic growth is tied to AI-linked activity, largely through exports.

China's economy is forecast to expand 4.7% in 2026, 4.5% in 2027 and 4.3% in 2028, supported by strong export performance.

Trade becomes a contest over resources and routes

Professor Arzu Al of Marmara University's Department of International Political Economy said a hardening of trade conflict after the US midterms would not be surprising. "China's weight in the global economy is no longer only Washington's concern. For many countries, production capacity, technology infrastructure, energy transition and critical raw material security now depend on their ties with China," Al said, adding that the combined use of US tariffs, technology restrictions, sanctions and tax tools is therefore no coincidence.

China remains one of the main centres of global manufacturing, Al said, noting that the world economy would struggle to operate at the same pace without Chinese capacity in areas from electronics and batteries to solar panels and rare elements. Weak domestic demand and industrial overcapacity, Al said, are making Chinese companies more aggressive in foreign markets, sharpening price competition and hardening industrial policy.

For Europe, Al said, the problem goes beyond cheap imports: China's scale advantages, state support, technology investment and depth in supply chains are narrowing the room for European industry, and the large goods trade deficit is one measure of that pressure. "Europe is now trying not only to protect its market but to hold on to production capacity," Al said.

Al put China's share in the processing of certain rare earth elements, parts of the solar panel supply chain and battery components at 80-90%, and above 90% in some areas. The struggle is moving into these fields, Al said, listing extra customs duties, rules-of-origin investigations, export controls, technology embargoes, local content requirements in public procurement, currency moves, sanctions limiting dollar access and Iran-Venezuela measures affecting energy supply as parts of the same file. Interest in Greenland fits the same framework because of Arctic security, critical minerals and new transit routes. "In the end, trade is no longer about selling goods but about control of resources, money, technology and routes, and the cost is growing for everyone," Al said.

Key takeaways

• Allianz Trade expects US trade policy to toughen after November's midterm elections, with average tariffs possibly reaching 21.3% in adverse scenarios
• Tariff-related export losses reached $74 billion in 2025 and are forecast at $42 billion in 2026
• AI demand is set to add 4.8 percentage points to global merchandise trade growth this year, while the Strait of Hormuz closure would cost 2.1 points
• South Korean exports rose 10.5% and Taiwanese exports 30% on demand for semiconductors and other AI inputs