Tariffs, trade and the road ahead: How 2025’s protectionist shift is reshaping global trade finance
GlobalData
5 min read
Although the current tariff environment presents immediate challenges, it also presents a chance to rethink traditional approaches to trade finance.
Indeed, both businesses and financial institutions can build greater resilience against future disruptions by embracing digital transformation and developing more agile financial solutions.
The road ahead may be uncertain, but the evolution of trade finance provides a roadmap for navigating protectionist waters.
And the waters are getting murkier. At the start of April, the United States launched some of the most aggressive protectionist trade measures since the Smoot-Hawley Tariff Act of 1930. What began as campaign promises made in the run-up to the Presidential election last year has, within a few weeks, redrawn trade routes, upended pricing models, and forced businesses worldwide to reassess their cross-border strategies.
The measures, which currently include a 25% tariff on imported vehicles, a baseline 10% levy on virtually all imports, and more punitive rates for dozens of “non-cooperative” nations, have created immediate challenges for exporters worldwide. The important word here is currently, as the picture may well change again after President Trump’s 90-day pause comes to an end.
For British businesses, despite the UK's relatively favourable treatment compared to other G7 economies, the impact is already becoming apparent across multiple sectors.
Companies are reporting disrupted supply chains, extended payment terms and increasing pressure on working capital; all of which has created a bottleneck of challenges demanding innovative financial solutions.
UK sectors facing the brunt
The automotive, aerospace and pharmaceutical sectors – cornerstones of British manufacturing – stand particularly exposed to the new US tariff regime.
UK steel exporters, which send approximately 200,000 tonnes worth over £400 million annually to the US, now face a stark 25% import tax that cancels out previous quota arrangements and exemptions. This comes at a particularly challenging time with the sector already on the brink – so much so that Parliament recently held an emergency session to secure the future of British Steel.
Meanwhile, Northern Ireland-based businesses find themselves in a unique position, navigating both UK and EU trade regimes. Whilst this dual status creates opportunities to reroute trade and potentially attract investment amid US tariff disruptions, it also introduces additional complexity, as firms must navigate two regulatory frameworks while managing cross-border risks.
Regardless of what sector or part of the country they are in, however, there are practical implications for all UK businesses. Companies throughout the supply chain are reporting increased costs, extended payment terms, and greater uncertainty. UK Export Finance (UKEF) has acknowledged the unprecedented challenge posed by Trump’s rapidly shifting tariff policies, which make it difficult to estimate how many UK businesses could be at risk.
There are also indirect impacts for companies relying on global supply chains passing through the EU, China, and the US, with suppliers raising prices on parts and raw materials to recoup higher tariffs elsewhere. As payment cycles extend and uncertainty increases, businesses find themselves with compressed working capital and greater exposure to cross-border risks.
Trade finance as a strategic shield
In this challenging environment, trade finance has demonstrated its capacity to adapt to economic and geopolitical uncertainty. Rather than breaking under tariff increases, trade finance has bent – continuing to grow in most parts of the world going through periods of market turbulence.
Take supply chain finance (SCF) programmes, for example. They enable buyers to extend payment terms while allowing suppliers to receive early payments, which enhances working capital for both parties in the transaction. This is particularly valuable as businesses face tariff-related delays and renegotiate contracts. Likewise, receivables programmes allow businesses to convert outstanding invoices into immediate cash, offering greater financial flexibility to navigate volatile markets.
The digitisation of trade finance processes further enhances these tools' effectiveness. By streamlining traditionally paper-based processes, businesses can access working capital solutions more rapidly and efficiently.
Advanced platforms, like LiquidX provide real-time position visibility – this allows banks and asset managers to track counterparty exposure, monitor credit limit utilisation, and anticipate scheduled payments, which are all critical capabilities when navigating disrupted supply chains.
Automated reconciliation systems also address the heightened complexity of cross-border transactions in an environment of shifting tariffs. These systems can process payments across multiple jurisdictions while maintaining visibility throughout the transaction lifecycle, thereby reducing operational risk at a time when margins for error are increasingly thin.
The path forward for financial institutions
Right now, financial institutions have an opportunity to provide much-needed liquidity and flexibility as businesses pivot their operations, renegotiate contracts, and explore new markets. Ministers recently announced an extra £20 billion of financing through UKEF, including state-backed loan programmes designed to encourage banks to keep lending to businesses impacted by tariffs.
With this in mind, the banks and financial services providers that can offer comprehensive solutions spanning supply chain finance, receivables programmes, and working capital optimisation will be the ones that emerge as crucial partners. These institutions can help businesses not only manage immediate cash flow disruptions but also mitigate payment and delivery risks across increasingly complex supply chains.
Looking ahead to the next five years, the trade finance market is set to grow significantly. As trade routes shift and protectionist measures proliferate, businesses will increasingly turn to financial institutions that can provide both the liquidity and the cross-border expertise necessary to navigate changing landscapes.
Dominic Capolongo is Chief Revenue Officer of LiquidX, a leading, award-winning SaaS FinTech in the trade finance sector
"Tariffs, trade and the road ahead: How 2025’s protectionist shift is reshaping global trade finance" was originally created and published by Retail Banker International, a GlobalData owned brand.
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