Navigating the new trade reality: Risks and opportunities in a shifting global landscape

Global trade has faced a series of disruptions over the past half-decade.

A potent combination of the pandemic, supply chain challenges, sustained geopolitical tensions and rapid technological advancements has led to the slowest global trade growth outside of recessions in 50 years.

World Bank data¹ highlights this reality: international trade grew by only 0.2% in 2023, while global trade in goods actually shrank by 2%. Many of these disruptions are hardening into long-term shifts that could reshape how trade is conducted. While they bring heightened risks and complicate the path to sustainable growth, they also open new opportunities for businesses agile enough to adapt.

A changing risk landscape

While many trade and supply chain disruptions initially triggered by the Covid-19 pandemic have eased, a greater degree of protectionism seems to be here to stay. There are also new challenges that are creating volatility and uncertainty.

Geoeconomic fragmentation is a growing concern. The US-China trade dispute has greatly diminished trade between the two countries – Chinese exports to the US dropped by more than 20% in 2023². This is having ripple effects across Asia Pacific as American (and other Western) companies diversify production capacity from China to other markets. At the same time, many Chinese companies are responding by setting up production facilities in other parts of Asia. As a result, some regional economies have benefitted. Vietnam, for instance, saw a 14.5% year-on-year³ surge in its export values in the first half of 2024, with exports to the US alone standing at US$54.3bn. Despite the recent change in US leadership, the current dynamics between the two economic powers are unlikely to change significantly.

Slow economic growth in China is impacting trade as well. With changing economic realities, China has shifted its focus to domestic consumption while simultaneously pushing up the value chain⁴ to explore higher-quality production rooted in technological innovation. These developments are realigning long-established trade norms, such as Taiwan’s efforts to divert its semiconductor manufacturing to the US and, potentially, India.

A push towards currency redenomination among emerging economies has begun impacting trade in the region too. Apart from diversification, the relative cost differential between dollar-denominated and renminbi-denominated trades has helped accelerate the greater use of the renminbi. There is growing activity among BRICS⁵ countries and a desire among some emerging market economies to reduce their dependence on the US dollar. In 2023, the Asean economic bloc signed an agreement⁶ to promote the use of local currency transactions to facilitate cross-border trade. The US dollar remains the dominant reserve currency by far and should continue to do so for the foreseeable future, but the use of alternative currencies in cross-border trade is on the rise. These developments are prompting the exploration of new payment pathways alongside established rails like Swift, such as China’s Cross-Border Interbank Payments System (CIPS). As geopolitical tensions continue, it is likely that more players and markets may consider exploring other emerging solutions and establishing new regional treasury centres.

There is yet another layer of complexity to the current global trade landscape: a growing focus on climate and sustainability that is bringing businesses face-to-face with new regulations and standards, such as the European Union Carbon Border Adjustment Mechanism (CBAM) and Singapore’s carbon pricing regime. The CBAM imposes import duties on products from companies that do not have a carbon pricing mechanism or carbon prices lower than the EU Emissions Trading System. Separately, as the EU sets higher environmental standards for imports entering the continent, businesses may need to invest more in research, clean technology and sustainable procurement to ensure their materials will meet these new standards. This will particularly impact sectors such as textiles, electronics, automotive and agribusiness.

The impact on trade finance

Given myriad factors at play, businesses are grappling with ever-shifting challenges in how they manage their supply chains and identify emerging opportunities. According to a global survey of 570 strategy leaders conducted by DBS, in partnership with FT Longitude, businesses are employing multiple strategies to diversify their supply chains: 51% are creating strategic partnerships with additional suppliers, while 47% are nearshoring and the same share are improving supply chain visibility through digital technology. Yet, more than half (54%) of finance and treasury teams are struggling to keep up with the pace of strategic change and investment across their global business.

As these trends play out, strategic support from financial institutions has become critical in helping businesses:

• Expanding SME trade financing. Limited access to affordable financing options is a significant barrier to growth for small and medium enterprises (SMEs) and makes conducting trade challenging. Banks play a crucial role in facilitating SME trade activity by offering targeted, low-cost solutions. These include providing inventory financing, facilitating small-value transactions, and providing effective cross-border payment capabilities. For example, DBS has partnered with the Receivables Exchange of India Limited to provide data-driven, pre-to-post shipment financing to SMEs, optimising working capital cycles for suppliers nationwide.

• Digital platforms. In today’s rapidly evolving trade environment, digital platforms are pivotal for simplifying global trade operations. To meet the demand for efficiency and cost-effectiveness, banks are integrating services such as embedded financing and reconciliation solutions within these platforms. For instance, financial institutions can leverage API connectivity with e-commerce and supply chain platforms to provide real-time financing, enabling businesses to access trade financing directly from the platforms where their transactions occur. Through real-time data exchange, financial institutions can assess the financial needs of businesses by reviewing their sales orders, inventory levels, and payment histories. DBS’ partnership with Infor Nexus exemplifies this, helping SMEs enhance cashflows with data-based trade financing solutions. Embedded reconciliation solutions further improve transparency by auto-reconciling orders, invoices and payments for smoother cash flow and fraud mitigation.

• Strategic partnerships are essential in strengthening trade finance ecosystems and fostering economic resilience across regions. For instance, DBS has signed a US$500mn facility with the International Finance Corporation (IFC) under the IFC’s Global Trade Liquidity Programme. The facility aims to promote capital and trade flows in emerging markets across Asia, Africa, the Middle East and Latin America, seeking to reduce a US$2.5tn global trade finance gap⁷ and accelerate economic progress.

• Transition financing plays a crucial role in enabling businesses to identify and scale new technologies that accelerate decarbonisation efforts. An example is the collaboration of Reliance Industries Limited and DBS Bank India to promote Compressed Biogas (CBG) projects. Given the fragmented nature of the CBG industry, which predominantly relies on agriculture and is subject to seasonal variations, DBS Bank India introduced significant customisations to the standard supply chain financing model to address these challenges. This financing enables the development of an ecosystem for vendor partners to aggregate agricultural residue as inputs for Reliance’s CBG production plants across India, thereby achieving enhanced commercial scale.

Financing trade in the future

As global trade faces ongoing shifts, banks’ role in trade finance is increasingly centred on innovation, resilience and sustainability. With businesses navigating a landscape of constant change, financial institutions are evolving to support not only immediate financing needs but also their long-term strategic goals.

As sustainability continues to shape global markets, financial institutions are focusing on aligning trade finance practices with environmental standards and exploring green financing initiatives alongside partnerships that encourage sustainable trade practices. This shift broadens funding options while reinforcing responsible growth in a globally interconnected economy.

The future of trade finance will rest on a collaborative ecosystem where banks, businesses, industry partners and governments innovate together, breaking down barriers and building resilience for sustainable growth in an interconnected world.

This article was first published by Global Trade Review in January 2025. 

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1. https://blogs.worldbank.org/en/voices/global-trade-has-nearly-flatlined-populism-taking-toll-growth

2. https://www.census.gov/foreign-trade/balance/c5700.html#2023

3. https://en.vietnamplus.vn/vietnams-exports-surge-in-first-half-of-2024-driving-trade-surplus-post289376.vnp

4. https://think.ing.com/articles/china-economy-not-in-a-great-decline-but-in-a-great-transition/#a10

5. https://thetricontinental.org/newsletterissue/de-dollarisation-brics/

6. https://www.aseanbriefing.com/news/asean-to-increase-local-currency-transactions-reducing-reliance-on-the-us-dollar/

7. https://www.adb.org/publications/2023-trade-finance-gaps-growth-jobs-survey