BOSTON, Jan. 13, 2025 /ennovaterz/ — Geopolitical rivalries, alliances, and aspirations are rewiring the global economy—and will continue to do so in the years ahead, accelerated by the imposition of tariffs by the US on foreign imports. Without a broad increase in tariffs, world trade in goods will keep growing at an average of 2.9% annually for the next eight years, but the routes goods travel will change markedly as North America reduces its dependence on China and China builds up its links with the Global South, which is cementing its power in the global trade map.
These are among the findings of Boston Consulting Group’s Center for Geopolitics latest report, Great Powers, Geopolitics, and the Future of Trade, published today.
“Global trade is set to top $29 trillion by 2033, but the routes these goods will travel is changing at a remarkable pace,” said Aparna Bharadwaj, managing director and partner at BCG, global leader of the Global Advantage practice. “Trade lanes were already shifting from historical patterns and looming US tariffs will accelerate this. Navigating these new dynamics will be critical for any global business.”
The report looks in detail at the regions and the sectors that would be most affected by the imposition of tariffs by the US:
- BCG modeled the direct impact of the 60/25/20 scenario (60% tariff on Chinese goods, a 25% on goods from Canada and Mexico, and a 20% on imports from all other countries). We estimate that the tariffs would add $640 billion to the cost of importing goods from the top ten US import nations, based on 2023 levels, unless alternative sources or suppliers are found.
- In terms of product categories imported by the US, the greatest impact would be on imported auto parts and automotive vehicles, which would primarily affect trade with Mexico, the EU, and Japan. Consumer electronics, electrical machinery, and fashion goods would be most affected by higher tariffs on Chinese goods. We estimate that a 60% tariff rate would add $61 billion to cost of importing consumer electronics products from China into the US.
“The world trading system is too volatile for firms to rely on likelihood alone,” said Michael McAdoo, BCG partner and director of global trade and investment. “Scenario thinking, and flexible action plans will help firms protect themselves against potential downsides and seize new opportunities.”
“For business leaders, being ahead of the curve has never been more critical,” said Marc Gilbert, a managing director and senior partner at BCG and global leader of the firm’s Center for Geopolitics. “Continuing to develop agile supply chains and, most critically, making sure they have the ability to sense and react to geopolitical shifts will all be necessary skills to operate in this new, fast-moving and high-stakes reality.”
