Tariffs and Global Trade Wars: Navigating Regional and International Trade.

April 8th, 2025

As the implications of the United States Baseline and Reciprocal Tariff Policy begin to be felt, trade dynamics and supply chains are being reshaped on a global scale. In establishing a 10% baseline tariff on imports and imposing steep reciprocal tariffs on countries with real or perceived high barriers to US imports how the global trade environment adapts, aligns and moves forward systemically remains to be seen.  

What is clear is that the ripple effects of one of the most dramatic escalations in US tariff policy in history are far-reaching, shaping domestic, regional and international political debates, economic strategies, and business operations worldwide.

Furthermore, the global trade finance gap, already at $2.5trn will only expand.  The confluence of political and economic circumstances will place a priority focus on regional trade and a more strategic development focus on domestic economies.

Globally it is the developing regions that are particularly vulnerable to the impacts of the current situation. Whether they manufacture in whole- or part- components and products or provide the logistics or business services the uncertainty will need to be mitigated. Coupled with rising interest rates and inflation traditional business lenders will become more risk-averse likely increasing finance application review processes and higher rejection rates.  A recipe for potential disaster for many SME’s across the globe.

SMEs, often the motor of domestic and regional development and trade, will be significantly challenged in both the short term and medium term given the requirement for many to sustain and adjust operations, production, markets, logistics and support services simultaneously.

Being able to assess, locate and secure working capital solutions will be the difference between weathering the storm or sinking in the ever-widening tumultuous trade finance gap.

Regional trade and domestic economies: the strategic pivot

Reassessing trade strategies and shifting focus towards regional partnerships and domestic economies is a key consequence of the current US Tariff Policy.

Countries currently facing the highest tariffs, namely China (54% combined), Vietnam (46%), Taiwan (32%) and India (26%), are sure to embrace a number of strategies which include identifying alternatives to US-centric trade - with far smaller countries doing the same.

-        China: As the largest exporter to the US, China faces significant challenges due to cumulative tariffs at 54% currently. Trump promised a 60% duty on Chinese goods during his 2024 election campaign. Regardless as to what eventual negotiations yield this situation has already accelerated China’s pivot towards emerging markets.

-        The European Union: comprised of 27 Countries is facing a 20% tariff rate on top of the baseline. EU Member states and European countries not in the Union have already pledged to prepare for and identify better intra-European and non-U.S.  trade agreements and responses. The extent to which individual states negotiate arrangements with the U.S. vs bloc approaches remain to be seen but the train has left the station.

-        Mexico and Canada: Goods compliant with the US-Mexico-Canada agreement on trade are exempt from tariffs, but will this continue indefinitely? Whilst this offers some relief for US automakers at present that relief is believed to be temporary given the uncertainty of North American relations.

Domestic operations and global Supply Chains Feeling the Pressure.

Not surprisingly, global supply chains are under more pressure than ever. Where the US imports vast quantities of goods and services, including but not limited to electronics, machinery and agricultural products – the higher tariff rates are sure to strain production, warehousing, shipping and transport.

Whilst Trump’s long-term policy objective may be to bring manufacturing back to the US, in the short-term the role out of the the global tariff policy is causing waves which may very well become tsunamis, putting many businesses large and small across the world  – to include the United States of America – at risk with higher tariffs resulting in things like:

-        Price increases: Higher tariffs will lead to increased costs for imported goods in the US, affecting consumer prices there and elsewhere.

-        Rapid Supply Chain Diversification: Businesses will need to diversify suppliers or even relocate their production closer to home to mitigate business risks in the U.S. and elsewhere.

-        Export challenges: US manufacturers are sure to face retaliatory tariffs from their trading partners, limiting access to international markets with smaller countries caught in the crossfire.

Adaption: The Only Way Forward.

At the time of publication of this blog, Corporates and SME's are engaging in short- and medium-term strategic analysis assessing how they are operating and trading now as compared to contingencies for how they will have to operate and trade moving forward.

Whether there is a slowdown or concentrated rise in global levels of trade linked to the U.S. remains to be seen. What is clear is that the rational trend is towards developing and securing local and regional capabilities and partners.

The assumption is that larger corporations will have the resources to weather global trade disruptions cause by tariff policy managing the tumult by leverage existing infrastructure, capacity and economies. They will be apt to explore new production, services and markets near and far. 

However, the reality is that SMEs will be far more vulnerable to the situation but also in the right place at the right time. SME’s are not doomed, as a matter of fact they can find themselves in very favorable circumstances vis-a-vi regionalisation – the decisive factor being resources.

ZVILO recognizes two truths, in order to mitigate risks and optimise opportunities SME’s must innovate, adapt, and streamline operations capable of responding to new operating realities or risk losing more than the competitive edge agility gives them AND that traditional lenders will not be able to provide solutions to the need for quicker access to the working capitol needs of solid business borrowers.

ZVILO: Regional Expertise and Just in Time Working Capital Solutions Bridging More Than the Global Trade Finance Gap

Within the uncertainty of the trade landscape, ZVILO is positioned as a key working capital source for the full range of SMEs seeking both stability and growth. With a history of regional trade expertise, our team provides timely access to working capital at favourable terms, ensuring liquidity during periods of uncertainty - particularly in light of tariff-induced operational and supply chain disruptions.

ZVILO has an experienced premier team with a unique collective history in providing finance solutions that support regional trade across businesses in the EU, Turkey, Africa, and the Middle East. ZVILO provides tailored finance solutions that overcome significant financing barriers for businesses borrowers such as traditional collateral requirements ensuring the much-needed liquidity that underpins local production capabilities is available.

ZVILO’s dedication to digital innovation means our platform is Person managed, and AI optimised, enhancing risk evaluation processes in order to make real-time, reliable financial decisions tailored to meet carefully risk managed SME needs in continuously shifting market conditions.

Whether tariff induced or otherwise, the ZVILO team of local, regional and international experts navigates shifting trade dynamics to continually foster regional partnerships and strengthen the domestic operations for our clients. We are committed to empowering corporates and SMEs for maximum local growth and regional collaboration, ensuring businesses don’t just survive but thrive amidst ongoing global trade disruption and fragmentation.