The coming year is set to be a turbulent time for world trade. One of the biggest challenges facing many firms will be an increasing number of tariff and non-tariff barriers that could push up the cost of importing and exporting.
A recent report from the World Trade Organization (WTO), for example, found that countries enacted 169 new trade-restrictive measures in 2024. These covered $887.7 billion worth of global trade.
Elsewhere, traditional trading arrangements are already being disrupted by US president Donald Trump, with long-standing deals such as the USMCA facing challenges and tension between the US, China and the EU set to escalate. So how can businesses navigate this challenging environment?
The trade challenges facing businesses in a more divided world
New tariffs may be the most obvious barrier set to impact world trade in 2025, but this is far from the only issue firms have to contend with. For instance, fragmentation is another major challenge. The WTO noted that the trade world is increasingly splitting into blocs. The organization noted: "[We are] seeing more evidence of trade fragmentation driven by geopolitical considerations. Trade is increasingly conducted among like-minded countries."
Indeed, the organization found that trade flows within blocs of geopolitically aligned countries have grown four percent faster than other trade blocs since the onset of the Russia-Ukraine war in 2022.
Firms also need to navigate what the World Economic Forum (WEF) has described as a "labyrinth of compliance requirements". This relates particularly to the flow of digital data and sensitive information. The WEF noted that this will not only increase operational costs, but also make it harder for firms to adopt digital technologies to improve efficiency and innovation.
Among the non-tariff regulatory issues that firms will have to deal with are:
- More complex rules of origin requirements
- Protectionist policies that favor local producers
- Environmental and sustainability regulations
- Labelling requirements
- Complex customs procedures
The WEF observed that businesses that depend on 'just-in-time' approaches to their supply chain will be particularly impacted by these issues. This is likely to lead to higher prices that will need to be passed on to customers.
However, the WEF added: “Companies shifting to a just-in-case approach may be similarly challenged. While this move may seem prudent given expected protectionist policies, it will inevitably increase pressure on economic costs and inflation.”
Key steps for addressing these issues
While these issues will pose difficulties for many importers and exporters, there are a few steps that businesses can take to limit their exposure to shifting market conditions. The WEF has recommended these key actions for businesses if they are to address these challenges.
- Improve supply chain visibility. Technologies such as AI that can provide real-time analytics and insight into supply issues help firms spot potential risk early and make better-informed decisions to mitigate any risks.
- Diversify sources. Reducing reliance on any one country or region for components or raw materials will be essential in navigating tariffs and other trade restrictions.
- Engage in scenario planning. Proactive training exercises to simulate the potential impact of new trade policies on operations can help with creating contingency plans and responding quickly to changing circumstances.
- Advocate for trade agreements. Engaging with policymakers to press for multilateral, regional and bilateral trade agreements can help reduce fragmentation and promote a more collaborative approach to trade.
