Nicholas Davies, Markel

Trade credit: Amid trade war, APAC firms must stay agile and ensure adequate protection

Nicholas Davies, Markel

April 2 2025

The US has implemented a new tariff regime across industries and countries, with import duties being a central aspect of US economic and foreign policy.

These measures aim to protect domestic industries from what the US government perceives as unfair trade practices, global excess capacity, and imbalanced trading relationships.

The policy includes mainland China, delayed actions against Canada and Mexico, extended duties on steel and aluminium, a new review of copper, and the potential for other significant duties. 

The imposition of these tariffs has far-reaching implications for global trade, affecting various industries and economies, and is generally expected to lower economic growth and increase inflation rates, and unemployment.

The economic consequences of these tariffs are expected to include higher costs for businesses and potential disruptions in supply chains, with consumers ultimately bearing the brunt of these costs and fuelling concern for a protracted inflationary environment.  

A “reciprocal” tariff system introduced in February allows the US to impose like-for-like tariffs against any country that retaliates. Moody’s estimates that a 10% universal tariff on all US imports could push inflation higher, with consumer price inflation increasing from about 2.4% to about 3.3%, in 2025 and about 2.3% to about 2.8% in 2026. 

How will Asia-Pacific fare?

Asia-Pacific countries are well-positioned to benefit from redirected trade flows as global supply chains adjust.

The region’s diversified trade relationships and growing intra-regional trade put it in a strong position to absorb shifts caused by global tensions.

Southeast Asian nations, in particular, have already attracted increased foreign direct investment, with manufacturers relocating production to avoid trade tensions, especially those between the US and China.

Vietnam, Malaysia, and Thailand have seen significant inflows as companies seek alternative hubs for production. 

“Offering tailored insurance solutions to help businesses manage these risks effectively and collaborating with insurers to develop tailored risk management solutions can alleviate some of that risk.”

However, companies in sectors such as manufacturing, motor, and consumer electronics will have to remain vigilant and brace for impact, as they often depend on imported components and materials. Other sectors vulnerable to insolvencies or cash-flow disruptions include manufacturing, agriculture, and retail.

The increased costs have led to higher prices for raw materials and finished products, which will result in reduced profit margins and increased operational costs for businesses.

This will strain working capital and financing requirements within an already higher interest rate environment, with potential re-alignment and restructuring contributing to increased operational and administrative burdens. Small and medium-sized enterprises (SMEs) are especially at risk due to their limited financial resilience.

Manufacturing and electronics

APAC countries are key players in global electronics and semiconductor supply chains. As US tariffs on Chinese tech products increase, Asean and India could see higher demand for production and assembly services, though navigating trade restrictions will be challenging.

Automotive and consumer goods

Japan and South Korea face tariff pressures but benefit from diversified supply chains. Southeast Asia may see production shifts from carmakers. The consumer goods sector in APAC may experience mixed effects due to price volatility. 

Agriculture and commodities

The US agricultural sector has been significantly impacted by retaliatory tariffs, with a 20% increase in farm bankruptcies in 2019. China’s retaliation has particularly targeted agricultural exports, leading to billions in losses.

Managing trade risks in Asia

The tariffs increase operational costs and strain cash flows, especially for industries reliant on imported components. This puts SMEs at greater risk of insolvency or cash-flow disruptions.

Delays and payment defaults due to tariff-related disruptions highlight the importance of trade credit insurance in mitigating non-payment risks.

To mitigate risks, businesses in APAC can diversify supply chains, renegotiate contracts to include tariff clauses, and explore alternative markets.

Trade credit insurers work closely with clients to identify sectors or suppliers that may be at high risk due to tariffs. Trade credit insurance can help stabilise cash flows and provide financial resilience during global trade disruptions.

With trade in flux, APAC businesses must stay agile and ensure they have the right protections in place. Offering tailored insurance solutions to help businesses manage these risks effectively and collaborating with insurers to develop tailored risk management solutions can alleviate some of that risk.

This article is written by Nicholas Davies, head of trade credit Asia at Markel.

MORE FROM: Comment
Partner Content
Join the mailing list Designed to help you stay ahead, our daily newsletter provides a round-up of the latest news and insights, delivered straight to your inbox.
Print Edition
Subscribe to receive our quarterly print magazine.