Tariffs Hold Potential to Disrupt Trade Finance

Trade finance has played an important role in supporting economic growth and global prosperity for more than a century. However, the resurgence of protectionist policies by populist governments threatens to disrupt global growth and hamper trade finance, a foundation of the global supply chain.

For the global economy, the threat comes from the potential for trade wars to cause widespread bankruptcies and defaults among the smaller businesses that make up the larger business supply chain. Currently, tariffs are made on imports not exports — a large business would need a very high threshold to cause a direct bankruptcy or default. However, the risk of concentration or dependency on too few suppliers or distributors — particularly small, less diversified businesses — is a threat over time for big business and for the regional and global economies that they sustain.

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