Dissecting the trade war:
The response, new data
and cautious optimism

The current uncertainties facing global trade are well known. We wanted to look further, to find out how global business should respond to President Trump’s trade war. So we contacted Chris Southworth, Secretary General of ICC United Kingdom. Here below are our main takeaways from this conversation.

The current situation

“At the macro level, this is an acceleration of a change in the world order on an epic scale. Looking at the US from a business point of view, it’s completely chaotic. You don’t know what’s happening from one day to the next. It’s almost an impossible business environment.”

It’s bad, but not that bad....

“Don’t forget that the US only represents 13% of global trade. We need to focus on the remaining 87% of the global trade system, which does not want a trade war. We want to continue and support the multilateral system and support the flow of trade. And then if you look at shipping, it’s even more stark. The US only has 0.6% of flagged global ships: they’re a tiny fraction of the global system. While the US does have the ability to disrupt everybody, they do not have the ability to dismantle trade. The most important thing right now is how the rest of the world reacts.”

The required response

“We need to pull together as a global community. All the regional blocks – the B-20, the EU, Africa, the CPTPP, the Commonwealth. Shifting from a reactive to a proactive response, I think we are going to see quite a dramatic change in the way we trade. While Europe and China can stand on their own two feet, this will be about the role of the ‘mid-powers’ – countries like Japan, Singapore, UK, Australia and Canada – to work with emerging markets to minimise the damage as much as possible. This is when multilateral dialogue is so important in trade reform.”

And the response is already happening

“The latest data from CIPS [the global procurement managers organisation] shows what we’re already seeing on a company level. 35% of procurement managers are already sourcing products outside of the US. This is a huge number of companies that are rerouting their trade. The big loser is the US, not everybody else.”

Brexit déjà vu

“Here in the UK, we have déjà vu. For us, it was Brexit; what you’re seeing in the market is exactly the same. Procurement managers excluded mainland UK and went straight to Europe directly – it’s just how business adapts. The difference is that the current situation is on steroids: it’s on a whole different scale.”

The importance of agility (something that digitalisation provides)

“In this hugely unpredictable trade environment in which tariffs are coming and going, companies need to be agile. And those companies that are transacting digitally are more agile. They can respond to changes, move goods and cash faster, with the transparency they need in the supply chain. From our perspective, the current situation is the catalyst for the digitalisation of trade. Companies need to reduce costs and risks while boosting agility and resilience. Digitalisation is the toolbox that companies need in order to do those things.”

Ending on a (cautiously) optimistic note

“This is obviously a very challenging situation. However, it’s just another aspect of shifting global politics and world order. It’s sad to see the US doing what they’re doing, but the world moves on, business will adapt. But it is also a massive opportunity for the rest of us to really get our act together and rethink the way we are trading. We need to step up and strengthen our international relations, broadening our export markets, and start digitalising trade at real speed. Let’s take the opportunities that are in front of us and capitalise on them. In the long run, we’ll be stronger.”