As companies navigate a tariff tsunami and reshoring renaissance, they are finding new tools and strategies\u2014some AI-powered\u2014to manage the challenge.<\/p>\n
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The drive to globalize that began in the years after World War II has reached an inflection point. President Trump\u2019s \u201cLiberation Day\u201d tariff plans have triggered a chain reaction that will have enduring repercussions for international trade and the movement of capital.<\/p>\n
While unprecedented in their scale\u2014and currently on pause\u2014Trump\u2019s actions did not come out of nowhere. Reshoring has been a trend since the early 2000s. The decline of industrial manufacturing in both the US and Europe fuelled opposition to trade liberalization, resulting in rising duties and the decision by many companies to relocate production facilities back to their home or neighboring countries. The new protectionism will not halt global commerce, but globalization in its current form \u201cmay have now run its course,\u201d HSBC Chairman Mark Tucker suggested at the bank\u2019s recent global investment summit. It also reinforces the shift toward regional supply chains and resilient manufacturing locations.<\/p>\n
Facing Evolving Trade Dynamics <\/h2>\n
Banks play a critical role in the $9.7 trillion trade finance ecosystem and their expertise will be crucial in helping companies navigate market fluctuations and an uncertain trade finance landscape.<\/p>\n
\u201cGiven the success of banks\u2019 trade finance divisions over the past few quarters, several banks increased their budgets for this year,\u201d notes Frank Tezzi, vice president and head of Trade & Supply Chain at CGI. \u201cHowever, many banks waited on spending their budgets until after the election. In the new year, we have seen a commitment to continue with this increased expenditure, particularly given the unique role trade banks can play supporting their customers in a rapidly changing geopolitical climate.\u201d BNP Paribas\u2019s slogan, \u201cthe bank for a changing world,\u201d helps explain why its global head of Trade Solutions, Jean-Fran\u00e7ois Denis, is sanguine about current developments.<\/p>\n
\u201cBanks are always confronted with changing situations,\u201d he says, \u201cwhether it\u2019s geopolitics, major events, or ESG topics. But I think for all business and trade finance in particular, our job is to accompany our clients in terms of mitigating their risks. We accompany our clients that are redirecting their flows. Whether it\u2019s nearshoring or diversifying, a lot of things can be de-risked.\u201d ING views trade finance as one of its pillars of growth and is looking to continue to invest in its trade products, people, and systems in the countries where it operates. In line with that strategy, it continues to support clients executing a sustainability transition with green- and sustainability-linked trade solutions.<\/p>\n
\u201cWe see growth potential in various sectors like energy, where we see an increased demand from clients in trade, supply chain, and receivable finance solutions,\u201d says Ronald Supheert, managing director-Global Lead Trade Finance Services at ING. Last year, ING\u2019s trade unit exceeded \u20ac2 billion in volume mobilized to support clients making green or sustainable transitions. <\/p>\n
Looming trade wars and the implementation of higher tariffs will have the greatest impact on clients that have large trade volumes with the US, Supheert expects, but he also has faith in their ability to meet their growth targets through other solutions and in other markets. <\/p>\n
Thanks to recent supply chain disruptors like the Covid-19 pandemic and the Russia-Ukraine war, banks have already intensified their focus on working capital optimization solutions that help clients secure supplies efficiently, says Eva Rubio Garcia, head of global transaction banking at BBVA.<\/p>\n
\u201cThere\u2019s an emphasis on being prepared for client treasury needs, particularly regarding instant payments and data,\u201d she says. \u201cFollowing a period of survival during Covid, companies are now investing in efficiency, rethinking financial flows, and optimizing the cash conversion cycle.\u201d <\/p>\n
The evolving tariff landscape poses a real operational and financial risk, and finance teams will need better visibility, faster decision-making, and stronger scenario planning if they want to adapt. Trade wars require agility and a better grasp of trade finance programs that can free up working capital. Working capital solutions such as supply chain finance (SCF), dynamic discounting, and receivables finance can help counter the effect of tariffs on the cost of capital.<\/p>\n
Tariffs cause instability, threatening supply chains and business continuity. SCF mitigates the adverse effects of disruptive events by unlocking working capital trapped in the supply chain. Orbian, one of the first companies to develop an SCF solution, offers a bank-agnostic model that is reflected in recent offerings including Express SCF, Fixed Rate discounting and Flex Pay, a Payment with Terms solution.<\/p>\n
The biggest trend of the last two years, says Orbian Managing Director Markus Schiffers, is Payment with Terms, which enables working capital optimization without requiring procurement to negotiate payment terms with suppliers. Payment with Terms allows providers to pay suppliers on the scheduled date while directly protecting the buyer\u2019s liquidity by extending their payment obligations. It allows buyers to manage their cash outflow more predictably, as they have a set schedule for payments to Orbian. This predictability helps with cash flow forecasting and overall financial planning. This safeguards the buyer\u2019s cash flow and enhances working capital, all without requiring supplier participation.<\/p>\n
\u201cYou need a solution that is very fast in improving working capital for buyers,\u201d says Schiffers. \u201cTo roll out supply chain finance to improve working capital takes 18 months or longer; Flex Pay is effective within two months. The combination of both solutions in one program achieves fastest working capital improvement at lowest cost to buyers.\u201d<\/p>\n
Moving fast is not always possible in real-life supply chains, however, as it takes time to establish new factories, a complex process that entails high costs, numerous operational challenges, and potential regulatory and compliance issues. Many companies that have adopted a \u201cChina Plus One\u201d strategy, diversifying their supply chains by establishing production hubs outside of China, will be holding off from further relocation decisions until after the dust settles.<\/p>\n
While China faces the highest tariffs at 145%, other Asian economies heavily dependent on exports to the US are also significantly impacted. Vietnam\u2019s garment industry faces a 46% duty and Bangladesh\u2019s textile sector a 37% tariff. African nations with strong US exports are also feeling the pain, with the most punitive duties levelled at Lesotho (50%), Madagascar (47%), South Africa (30%), and C\u00f4te d\u2019Ivoire (21%). <\/p>\n
Regional Shift <\/h2>\n
Countries on the receiving end are scrambling for ways to present a united front. The Trump tariffs have led to the first economic talks in five years between South Korea, China, and Japan, with the goal of making regional trade easier, and they appear likely to increase trade among countries in the Global South.<\/p>\n
Between 2007 and 2023, South-South trade more than doubled from $2.3 trillion to $5.6 trillion. Daniel Soloway, head of Trade & Working Capital, Europe & Americas and global head of Distributor Finance at Standard Chartered, believes geopolitical uncertainties and a destabilized tariff landscape will cement the importance of new trade hubs.<\/p>\n
\u201cThe World Trade Organization expects global trade to rise by about 3% in 2025,\u201d he notes. \u201cA lot of that is driven by intra-emerging market trade, by which I mean Global South to Global South trade. We believe China, India, and ASEAN will continue to be the largest contributors for global growth over the next decade.\u201d <\/p>\n
Standard Chartered is hoping to facilitate the shift. \u201cWe have strong and extensive teams on the ground in Dubai, China and in Singapore,\u201d says Soloway, \u201cso we\u2019re capturing new opportunities in those intra-Asia trades in ASEAN and Middle East network corridors.\u201d <\/p>\n
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\u201cWhile we believe that tariffs will affect growth in certain corridors, we believe it will be offset by growth in other corridors that we can capture.\u201d<\/p>\n
<\/span><\/p>\n Daniel Soloway<\/strong>, Head of Trade & Working Capital, Standard Chartered <\/strong><\/p>\n <\/span><\/p>\n Asia is home to 18 of the 20 fastest-growing corridors and 13 of the 20 largest, according to the McKinsey Global Institute. With a presence in many of those markets, Soloway says, Standard Chartered is well positioned to capitalize on changing trade flows. From a logistics perspective, planning will be key. Aside from near-shoring and diversified supply chains, logistics networks need to be flexible enough to adapt to new customs barriers and margins sufficient to absorb extra costs.<\/p>\n <\/span><\/p>\n \u201cUnexpected consequences in logistics are affecting business operations,\u201d warns Jukka Kuusala, head of Trade Finance at Danske Bank. \u201cTariff adjustments have become complex. What was once a single tariff for machinery now varies for components, such as aluminum and stainless steel parts. This complexity is causing logistics problems as customs authorities struggle to manage imports and exports efficiently, leading to shipment delays.\u201d<\/p>\n Increasingly, export\/ import companies in Europe are requesting additional security for US transactions, Kuusala notes. \u201cWhile European companies typically use bank guarantees to secure contractual obligations, US companies prefer standby letters of credit. This difference has led to increased demand for advisory services as companies navigate these requirements.\u201d <\/p>\n Companies will need to remain adaptable to uncertainties and search out trade finance solutions to help them manage balance sheet pressures and working capital. Currency mismatches are also a threat; Standard Chartered offers a digital foreign exchange solution, SC PrismFX, to address these issues.<\/p>\n Clients are seeking guidance on navigating current uncertainty, potential tariffs, and geopolitical issues, Soloway notes. They are also concerned with maintaining margins and price elasticity and managing working capital metrics.Clients are seeking guidance on navigating current uncertainty, potential tariffs, and geopolitical issues, Soloway notes. They are also concerned with maintaining margins and price elasticity and managing working capital metrics. <\/p>\n In addition to its Treasury Leadership Forums, which bring together corporate treasurers with Standard Chartered\u2019s in-house experts, the Standard Chartered Trade Institute, launched in 2024 and accredited by the London Institute of Banking & Finance, offers training programs to support clients through these changes.<\/p>\n Useful tools include trade finance platforms that centralize and digitize trade finance operations, allowing companies and their banks to efficiently manage instruments like letters of credit, guarantees, and collections. APIs enable seamless integration between different systems, such as the bank\u2019s core banking system, the client\u2019s ERP system, and third-party services. AI and machine learning are now being used for document processing, risk assessment, and compliance: automating and forecasting, among other functions. <\/p>\n AI is emerging as a critical tool for streamlining tariff classification, duty calculation, and customs documentation, notes Michelle Bonat, chief AI officer at AI Squared, along with monitoring trade regulations, providing personalized alerts, and powering chatbots for tariff inquiries.<\/p>\n \u201cBanks can integrate AI into financial planning tools, helping businesses to run what-if simulations on how tariff changes (e.g., Brexit, US-China tariffs) might affect costs or supply chains,\u201d says Bonat. \u201cAI can suggest alternate supply chain routes or sourcing options based on tariff structures, usually achieved through the use of predictive analytics, optimization algorithms, and AI-based simulation models.\u201d<\/p>\n The global trade environment is changing, and businesses must adapt. But the plethora of new tools and solutions suggests that by embracing innovation, seeking expert guidance, and proactively managing risks, they can still find ways to thrive.<\/p>\n<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":" As companies navigate a tariff tsunami and reshoring renaissance, they are finding new tools and strategies\u2014some AI-powered\u2014to manage the challenge. The drive to globalize that began in the years after World War II has reached an inflection point. President Trump\u2019s \u201cLiberation Day\u201d tariff plans have triggered a chain reaction that will have enduring repercussions for […]<\/p>\n","protected":false},"author":1,"featured_media":238322,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[93],"tags":[10924,5714,2083,5110,21083],"dealstore":[],"offerexpiration":[],"class_list":["post-238321","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-finance","tag-global","tag-magazine","tag-sea","tag-uncertainty"],"yoast_head":"\n
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Navigating Uncertainty<\/h2>\n
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