Tariffs are supposed to be a cost businesses can calculate. But with US trade policy changing rapidly, the bigger challenge for exporters and importers may be knowing which tariff will actually apply when goods arrive.
In this episode of Trade Links, Tim Phillips is joined by Aastha Gupta and Scott Livingstone to explore the economic impact of tariff uncertainty and what it means for businesses making cross-border investment and sourcing decisions.
The conversation then turns to another major challenge for Europe: the growing impact of Chinese industrial overcapacity, increasingly described by economists as “China shock 2.0”. As Chinese exports move further up the value chain, the panel considers whether Europe faces not simply a trade challenge, but the potential hollowing-out of its industrial ecosystem.
5 key takeaways
1. Tariff uncertainty can be as damaging as tariffs themselves
Businesses are accustomed to dealing with tariffs. The problem is that the rules are now changing so quickly that companies may struggle to know what their costs will be when goods actually arrive.
An order can be negotiated today, placed next week, shipped a month later and cleared through customs weeks after that. Knowing today’s tariff is therefore less useful if the rate could change before the transaction is completed.
2. The US tariff regime has become deliberately complex
More than 50 separate US tariff announcements were made during 2025, according to research discussed in the episode. Rates, exemptions and the rules governing them have continued to evolve.
Scott argues that the fluctuating communication around tariffs should not necessarily be viewed as accidental. Instead, uncertainty can provide negotiating leverage and give the US administration greater “optionality” when dealing with trading partners.
Legal challenges add another layer of uncertainty, with multiple cases contesting the basis for different US tariff measures.
3. Confusion can cause businesses to put trade decisions on hold
The economic impact of tariffs doesn’t necessarily require trade to stop altogether. If companies cannot confidently predict their costs, they may delay orders, postpone contracts or stick with existing suppliers rather than take a risk on a new trading relationship.
The impact may be particularly pronounced in more transactional markets, where suppliers can easily be substituted. Long-standing strategic supplier relationships may be more resilient because replacing them is harder.
4. China’s industrial capacity could become Europe’s next major trade challenge
Scott introduces the concept of the “grey rhino”: a high-probability, high-impact event that is visible in advance but insufficiently acted upon.
Aastha identifies China’s growing industrial capacity as one such threat. Weak domestic demand in China, combined with greater US protectionism, could encourage more Chinese exports towards open markets such as Europe.
And this isn’t limited to low-cost consumer goods. Chinese companies are increasingly competitive in areas including EVs, batteries, machinery, chemicals and sophisticated industrial equipment.
The concern is that sustained competition could eventually weaken the wider European manufacturing ecosystem, affecting suppliers, investment, skills and industrial know-how.
5. Europe faces a difficult balancing act between growth and resilience
Chinese competition does not affect every European country or company in the same way.
Manufacturers competing directly with Chinese products may see the situation as a threat, while companies using Chinese steel, batteries or other components may benefit from lower input costs.
That creates a difficult policy trade-off for the EU: maintaining access to Chinese investment and inexpensive inputs while reducing strategic dependencies.
The panel describes this shift as moving from “decoupling” to “de-risking” – not ending trade with China, but reducing vulnerabilities in strategically important areas.
What to watch in future:
Egypt and Ethiopia: Scott highlights renewed tensions over Ethiopia’s plans for additional dams on the Nile.
China’s oil inventories: Aastha is watching evidence that China’s crude imports may be softening after a period of significant stockpiling, including purchases from Russia.
Speakers:
Tim Phillips, Host
Aastha Gupta, European Economist, Economics & Market Strategy
Scott Livingstone, International Advisor
This episode was recorded on 19 August.
Please view our full disclaimer here (https://www.natwest.com/corporates/disclaimer.html)
All details correct at time of recording.
For any terms used please refer to this glossary https://www.natwest.com/corporates/insights/markets/glossary.html
Please view our full disclaimer here: https://www.natwest.com/corporates/disclaimer.html
All details correct at time of recording.
For any terms used please refer to this glossary https://www.natwest.com/corporates/insights/markets/glossary.html
Please view our full disclaimer here: https://www.natwest.com/corporates/disclaimer.html
