Trade volatility – finding opportunities as globalisation rewires

• Globalisation is not retreating, it is rewiring, creating opportunities for agile companies that understand the emerging trade risks and how to navigate them.
• Businesses are responding to new trade barriers by diversifying into new markets and extending supply chains into alternative end markets.
• The highly uncertain environment highlights the importance of working capital solutions to unlock funds trapped in supply chains – such as supply chain finance and receivables finance.

Volatility is the new normal in international trade. Growing protectionism, persistent inflationary pressures, and geopolitical flashpoints are just some of the consistent themes that are prompting business leaders to rethink fundamental assumptions about globalisation and how to plan ahead for future growth.

But globalisation is not retreating. Rather, it is rewiring. Throughout a decade of shocks – from the pandemic and the imposition of new US tariffs, to conflict in Europe and the Middle East and ongoing shipping disruptions in the Red Sea – businesses have constantly adapted to changing circumstances by adjusting strategies and identifying new opportunities.

A recent HSBC survey of 3000 senior leaders, business owners, and institutional investors backs up this idea of adaptability, and how the current climate of change is informing their existing and longer-term plans.

It found that 87% of businesses and investors are more willing to take calculated risks than they were five years ago, while 72% of respondents expect moderate to significant repositioning over the next three years. There was also enthusiasm for deploying capital in high-growth markets, despite the volatile backdrop¹.

Rising protectionism

Changes in trade policy are a significant contributor to the volatile environment, as growing protectionism has forced businesses to adjust to shifts in the rules governing global commerce.

Governments around the globe are increasingly using trade-distorting measures – such as tariffs, quotas, and subsidies – to achieve both economic and political outcomes. In 2025, the US imposed sweeping new tariffs on nearly all counties. In 2024, the EU introduced duties on electric vehicles from China², while more recently Mexico imposed tariffs as high as 50% on a wide range of products from countries that lack a free trade agreement with Mexico³.

But as the world’s largest importer, accounting for more than 13% of global imports last year, US tariffs represent the single most important change in trade policy⁴.

Ever since the US rolled out fresh rounds of tariffs from February last year, its trade policy has remained in flux, with new duties imposed on certain countries and sectors, while some goods have been exempted and some countries have negotiated reductions. This has created a new set of challenges for US importers, as well as trading partners, as they seek to navigate these changes.

And in February 2026, the US Supreme Court ruled that tariffs introduced under the International Emergency Economic Powers Act (IEEPA) were unlawful, paving the way for refunds to businesses that have paid the duties⁵.

So far, tariffs have contributed to price increases in the US, although the impact varies by product category⁶. US consumers and importers are absorbing most of the cost, and it is unclear how much tariff-related inflation will persist through the rest of this year.

Evolving supply chains

The new tariff regime has accelerated the rearrangement of supply chains that was already underway. Successive global shocks mean that there is a growing emphasis on economic security in many countries, with diversification and resilience increasingly taking precedence over maximal efficiency. On the one hand, there is a move among importers to have a diversified network of suppliers to protect against future trade disruptions. On the other hand, exporters are diversifying into new markets to reduce their reliance on individual countries.

Many supply chains still start in China, due to the country’s strength in manufacturing a wide range of goods. Furthermore, the tariff actions last year saw China’s effective tariff rate in the US rise to 35% but that has since reduced to around 23% today⁷.

The drive towards diversification is redirecting supply chains from China to other countries in Asia – especially in sectors like clothes manufacturing, where the costs of switching the source of production are low. ASEAN countries are beneficiaries of this trend.

Vietnam in particular is doing more business in areas like electronics, textiles, and footwear. Total foreign direct investment in the southeast Asian country reached USD38.4 billion last year⁸. This strong trade momentum, and a resurgent consumer, has helped Vietnam be one of the fastest-growing economies in Asia⁹.

Supply chains are not only being redirected, but also elongated, leading to complex, indirect routes via third countries.

For example, Chinese ecommerce platforms are opening distribution centres in the US, storing and shipping inventory locally after the removal of the de minimis rule that allowed low-value packages entry into the country duty free¹⁰.

Europe is also an important market for Chinese companies – especially for the country’s manufacturers of batteries for electric vehicles and energy storage, which provided more than EUR 5 billion (USD 5.9 billion) in greenfield FDI in 2024¹¹. Chinese firms are building electric vehicle and battery production capacity in the region, with Hungary emerging as a key regional hub within the bloc¹².

There are downsides to these lengthened supply chains, such as increased shipping, logistics, and compliance costs. In addition, stretching the path from producer to the final consumer can add fragility to a supply chain, due to increased exposure to risks across a greater number of dependent links.

Another challenge is financial, since supply chains are typically extended by establishing new businesses. These companies lack a track record, making it hard for them to pass a credit assessment, putting pressure on working capital requirements. This kind of scenario highlights the importance of risk transfer solutions like receivables finance, which allow suppliers to quickly turn invoices into cash.

A new energy shock

Tariffs dominated the economic agenda in 2025. This year, oil and gas prices have taken centre stage following a multi-month blockade of the Strait of Hormuz. This is the second major energy shock of the 2020s, after the surge in energy prices triggered by Russia’s invasion of Ukraine in 2022, and is a reminder that global supply chains remain highly exposed to geopolitical risk.

The closure of this critical waterway in the Middle East adds a new complication for global trade – not least because it affects 30% of global seaborne crude oil trade, 20% of liquefied natural gas flows, and a third of maritime fertiliser trade¹³.

The immediate effect for exporters is more costly logistics, especially along the Asia to Europe trade corridor, as companies are paying higher freight rates on shipping to travel the longer route via the Cape of Good Hope, while air freight are elevated due to the surge in jet fuel prices. On the demand side, elevated prices at the pump negatively affect consumer disposable income.

And the cost of energy will likely remain elevated in the near-term, with forecasts suggesting that it could take two to three months to re-establish steady exports once the Strait of Hormuz reopens, though initial volumes would remain below pre-conflict levels¹⁴.

As a result, growth in global trade could slow more than previously anticipated, due to weaker demand and greater uncertainty. UNCTAD now forecasts world goods trade growth in 2026 could slow to a range of1.5% to 2.5%, compared with 4.7% last year¹⁵.

A diversified currency regime

Looking to the long term, there is another notable trend that could influence how businesses engage in international trade as countries seek multi-currency solutions in trade finance.

The new tariff regime, along with growing expectations for inflation, have led some countries to adopt new currency arrangements, benefiting the euro, the renminbi, and gold. In fact, gold’s share of central bank reserves surpassed US treasury holdings for the first time since 1996¹⁶, representing a generational shift in how central banks view the US currency.

Changes in central bank reserves have implications for a currency’s use in trade. The broad trust and demand for a currency as a safe-haven asset make it a preferred medium for invoicing in international transactions. This process reinforces itself, as greater use in trade increases demand to hold the currency in reserves.

The US dollar’s declining share of global reserves is not new. Ever since the euro was launched in 1999¹⁷, the US dollar reserve position has gradually fallen from 71% to 56.9% as of the third quarter of 2025¹⁸. Consideration should be given to the inflationary effect of divergent, downward movement of interest rates in the US on the dollar’s role as a store of value.

Businesses should therefore be prepared for a currency environment that becomes increasingly multipolar, as importers and exporters start to pay, and be paid in, a growing range of currencies.

Managing working capital

Fluctuating exchange rates, unpredictable interest rates, and supply chain disruptions together make the effective management of working capital a top priority. When done successfully, it can be felt across an entire business.

Companies navigating a more fragmented and unpredictable trade landscape will need financial structures that can support complex supply chains. Diversifying suppliers, entering new markets and holding inventory buffers all increase pressure on cash flow and liquidity. That makes optimising working capital a core resilience lever, freeing up trapped cash, strengthening supplier ecosystems and allowing flexibility to respond quickly to shocks and shifting trade routes.

Bank credit could become more scarce going forward. Global business insolvencies are forecast to rise by 6% in 2026, as the conflict in the Middle East puts pressure on businesses²⁰. More bankruptcies will likely lead to credit rationing by lenders, which will affect the kind of borrowing that is extended to non-investment grade companies.

“The traditional supply chain model built for scale and efficiency is being dismantled, and corporates are building a portfolio of supply chain strategies. This logistics optionality needs to be funded,” said Aditya Gahlaut, Regional Head, Asia Pacific, Global Trade Solutions, HSBC. “With resilience ultimately becoming a balance sheet item, trade finance can help optimise working capital and mitigate risks inherent in supply chain diversification.”

Supply chain finance for example, which is usually anchored against an investment-grade company, is an important way to inject liquidity to suppliers that are typically non-investment grade, without using the supplier’s credit availability with banks. Subject to auditor approval, these solutions for the buyer can retain trade creditor status.

Similarly, receivables finance that accelerates cash flow from investment-grade buyers is an effective way to obtain affordable working capital financing without utilising bank credit. With auditor sign off, these solutions can be done on a ‘true sale’ basis, where trade debt can be sold for cash.

In short, working capital solutions allow companies to leverage their position in the supply chain to defer payments to suppliers or accelerate payments from buyers. They do so in a way that helps improve debt metrics – boosting a firm’s credit standing and reducing its interest costs.

Charting a path forward

Despite the evident challenges, there remains robust optimism among businesses towards the future of global trade, as supply chains reroute to new high-growth markets. But to seize the opportunities companies need to be aware of the risks and how to best navigate them, with working capital solutions an important part of strategies to build resilience and efficiency into an organisation’s international network.

At HSBC, we look forward to working with both importers and exporters as they recalibrate their operations, rethink how they deploy capital, and chart paths into new markets.