The Silence Before the Tariff
Trump 2.0’s so-called «Liberation Day» is just around the corner. What does that mean for the Asia Pacific region?
The frenzied rounds of tariffs and reciprocal tariffs make for busy times in commercial banking, prompting everyone to sit up and take notice while the fortunes of the once Magnificent 7 recede into the financial market’s rearview mirror.
It is once again the hour of the commercial banker, something finews.asia has commented extensively since US President Donald Trump’s re-election. Still, even the most work-shy of bankers can’t be looking forward to the so-called «Liberation Day» this coming Wednesday, when the US levies another round of matching reciprocal tariffs.
Helicopter View
While those hapless commercial bankers get ready to sort out the new piling wads of invoices and charges, it might be a good idea to take a step back and take a helicopter view of the situation.
A piece in statista cuts through the noise of the extremes of either side of the economic equation, saying that, until 2022, the Americans and the Europeans generally applied the lowest tariffs worldwide.
Still Relatively Low
Generally, their graphic shows that tariffs of those two regions currently remain below those imposed by regional heavyweights China and India and are far less than the trade levies applied in Africa and Latin America.
Given that the benefits of unfettered free trade worldwide are not as open and shut as conventional economic wisdom would like to have us think, as per Perplexity, the current steps taken by the US administration may be what usually happens when you try to change things on a large scale economically.
Protectionist Landscape
An Allianz Global Investors note published in mid-March also takes a more sober view of the goings on, saying that trade finance «can adapt» to the more protectionist global landscape, given businesses «need financing» for domestic and cross-border «deals».
«These evolving terms of trade will have widespread effects on countries, industries, and individual companies that depend on international trade. But if history is any guide, we can expect global commerce to withstand any onset of more protectionist measures, fueling continued demand for trade finance,» Allianz Global Investors indicated.
Remarkable Durability
The active asset manager explained that trade finance has displayed «remarkable durability» despite the threat of trade wars and other geopolitical shocks. According to them, the sector is not just about international deals, but it is an essential way for companies to manage «increased import costs, enter new markets, and establish relationships with new buyers and suppliers».
Especially Valuable
Moreover, demand from corporate treasurers is rising, and the sector can mitigate risk, particularly in uncertain times.
«This risk mitigation capability makes trade finance especially valuable as companies adjust to shifting supply chains,» Allianz Global Investors maintained.
Unintended Consequences
Still, it is the quiet before the storm, and the region, economically speaking, will only know more by very late Wednesday local time. This is, after all, a complete about-face from the Roosevelt-Wilsonian post-war era of international free trade once propounded by the US itself.
If nothing else, it is a remarkable mother of all economic pivots, and the only thing that is certain about such a large-scale change in the economic order is that it is almost guaranteed to lead to a host of unintended consequences.
