Trade risk in the age of tariffs

When tariffs first surged back onto the agenda in 2024, the immediate concerns were higher costs, tighter margins and another inflationary shove for importers. But that interpretation now looks too narrow. The disruption may have arrived through trade policy, yet its effects are spreading far beyond customs duties.

That is partly because this is not, at least not yet, a conventional trade war marked by broad retaliation. Only China and Canada have responded in kind,with Canada’s measures likely reflecting an effort to strengthen its position in the United States-Mexico-Canada Agreement negotiations. The main story is the one-way pressure created by U.S. tariffs: higher costs for U.S. importers and weaker demand for exporters selling into the U.S., creating asymmetric effects that ripple through global supply chains.

For multinational firms, tariffs are feeding into a broader loss of confidence in the trading environment itself. Policy looks less predictable, geopolitical friction is becoming harder to separate from commercial decisions, while yesterday’s supply chain logic no longer feels quite so dependable. That is changing how companies assess risk, where they invest and how easily they can secure financing and insurance for cross-border business. The shift is already showing up in how companies describe the pressures they face. “In our 2026 Political Risk Survey, 61% say rising trade barriers are the geopolitical trend they find most challenging to manage,” says Sam Wilkin, director of political risk analytics at Willis.

Trade barriers are now landing as a central business risk, even in a world already crowded with conflict, political polarization and a wider sense of economic strain.

From cost pressure to strategic hesitation

For many companies, the biggest immediate consequence of the current environment is not retrenchment but hesitation. Businesses are still trading and planning, but they are increasingly reluctant to make major commitments while the policy picture remains unsettled.

That caution is particularly visible in longer-term investment decisions. An Oxford Economics client survey^[1] on how U.S. tariff policy is affecting investment plans suggests delayed decision-making remains a common response. “Some of the biggest responses are to postpone investment decisions or delay investments,” says Wilkin. “Those were popular answers last year and remain so.”

What matters is not the delay itself, but what lies behind it. Many firms now see tariffs as a real and continuing risk. The problem is that the wider landscape still looks too unsettled to plan around with confidence. Many are waiting for more clarity before making decisions that could take years to pay off.

Realistically, that uncertainty tends to hit bigger capital decisions first. It is most obvious in sectors directly exposed to U.S. tariff action, especially where those exports matter heavily to the local economy. “If you were an automobile manufacturer with plants in South Africa exporting to the U.S., for example, you're probably not going to embark on a major expansion of production capacity. Instead, you'd be more likely to adopt a 'wait and see' strategy” says Michael Creighton, regional director, Africa, credit and political risks at Willis.

The pressure is not confined to countries with direct exposure to the US. One striking feature of the current tariff environment is how quickly secondary effects spread. “Certain countries may not export much directly to the U.S., so the direct impact is limited,” says Creighton. “But they might export commodities to China, which are then processed and re-exported into the U.S. If China exports less to the U.S., it may also import less from the countries supplying the materials and inputs that feed those export industries.”

Supply chains get a harder look

These secondary effects are one reason supply chains are facing scrutiny, but this is not an entirely new story. The rethink began during the pandemic when businesses discovered that efficiency alone offered little protection if the system seized up.

“During Covid, companies suddenly realized that globalization could be heavily disrupted by a pandemic,” says Creighton. This was then closely followed by Russia’s invasion of Ukraine, which further impacted supply chains, most notably grain exports.

“Over the past five or six years, there have been enough events to make it a prudent decision to build supply chains that are less exposed to global shocks,” Creighton adds. “Savvy businesses are becoming increasingly resilient by learning to adapt quickly to global trade challenges.”

Policy drift has a habit of turning into commercial friction. It can complicate market access, reshape compliance requirements and add fresh uncertainty to decisions that are already hard enough. Tariffs have accelerated that logic, but they have also made it messier. The old formula of cheapest supplier, leanest inventory and fastest route is giving way to a more layered calculation. Companies are weighing cost against resilience, sanctions risk and the availability of financing support if conditions deteriorate.

Many businesses are trying to move in that direction, even if the path is far from straightforward. “There’s a lot of focus on nearshoring and friendshoring,” says Wilkin. “But because of the uncertainty, not just around tariffs but around geopolitical alignment, it’s hard to use that as a strategy. You end up asking who exactly counts as a friend.”

That is the catch. Nearshoring and friendshoring sound like straightforward responses, but they depend on stable alliances and durable trade frameworks. Both look less certain today than they did even a few years ago.

Trade finance under scrutiny

Financing is also feeling the strain. Companies still need working capital, day-to-day liquidity and transaction support, but banks and insurers are taking a harder look at the risks associated with those flows.

“There hasn’t been a direct decline in the need for trade finance, working capital or liquidity, but the financial institutions providing it are more cautious and are scrutinizing the risks more closely,” says Creighton. In practice, transactions that once looked routine are now drawing more questions about supply routes, counterparties and sector exposure, with geopolitics now part of the mix. “Since March, even on fairly standard enquiries, everyone has been asking whether there is a touchpoint to the Middle East, for instance,” Creighton adds.

None of this means the market is retreating. Letters of credit and insurance capacity remain available, but both now sit behind a tighter risk filter. Sector stress, shipping routes and commodity origin all matter more today, as does the broader question of regional instability. “Trade and trade finance are still robust, and people want to do business,” says Creighton. “But there is a stronger degree of risk analysis going on.”

The wider strategic split

Tariffs also matter because they are now entangled with a broader strategic realignment. This is no longer just about one country or one tariff schedule. It reaches into regional blocs, regulatory divergence and, over time, even the currencies used to conduct trade.

One fault line stands out in particular. “There is a real risk of divergence between the U.S. and the EU across a range of areas, including trade policy, Russia, China, digital services taxation, regulation of social media and the carbon border adjustment mechanism,” says Wilkin.

While that may sound remote from day-to-day commercial decisions, policy drift has a habit of turning into commercial friction. It can complicate market access, reshape compliance requirements and add fresh uncertainty to decisions that are already hard enough.

At the same time, other regions are looking for ways to reduce dependence on a system that now feels less predictable. “It is very hard to replace the dollar as a reserve currency,” says Wilkin. “But the more meaningful shift is happening in trade itself, in the currencies used to price and settle international transactions.”

That is the deeper story coming into focus. The tariff shock may have grabbed the headlines, but the more lasting shift lies beneath, in delayed investment, redesigned supply chains, tighter financing scrutiny and a broader rethink of strategic alignment. Companies operating across borders need a firmer handle on risk before policy, pricing or geopolitics shift again.

Read the Political Risk Survey Report 2026 to find out more on how tariffs, geopolitical risk and structural change are reshaping business strategy and resilience globally.

This article was originally published in Global Trade Review. Minor updates have been made to reflect developments since the original publication.

Footnotes

1. Oxford Economics client survey on the impact of U.S. tariff policy on investment plans, proprietary research available to Oxford Economics clients only. Return to article undo