Shifting supply chains in an age of tariffs and new demand - Trade Treasury Payments

Global supply chains are under strain because of geopolitics, tariffs, and the pull of new consumer markets. Trade is travelling farther, through more hubs and often with less transparency, making the stakes high for banks, multilateral institutions, and the firms that depend on them. 

As supply chains lengthen and diversify, resilience and access to finance are becomming ever more central to growth. At a Monday afternoon panel session at Sibos moderated by Sukand Ramachandran, Managing Director and Senior Partner at BCG, the audience heard from Makiko Toyoda, Global Head of the Global Trade Finance Program & Global Supply Chain Finance Program at IFC; Vivek Ramachandran, Head of Global Trade Solutions at HSBC; Yunfei Liu, Deputy General Manager, GlobalTransaction Banking Department at the Bank of China; James Fraser, Global Head of Trade and Working Capital and Head of EMEA Payments at J.P. Morgan; and Enrique Jose Garcia Rico, Global Head of Trade and Working Capital Solutions at Santander Corporate and Investment Bank.

Emerging markets as the new growth engine

Let’s start in the places that have long been treated as peripheral. That is where much of the growth is now located, and a big reason why supply chains look different today than they did in a pre-2018 world. The simplest way to understand this is to think of South-South trade, which is trade between emerging economies. 

From the vantage point of the International Finance Corporation, those corridors are already mainstream. Makiko Toyoda said, “What we see in our portfolio, the South–South trade is over 50%, and in recent years this number is growing.” She added that the trend is accelerating, noting year-on-year growth in IFC’s own figures, and the fact that intra-regional trade inside Africa is rising alongside big bilateral lanes such as Brazil-Nigeria. 

Greater South-South flows mean more transactions in markets where legal frameworks, working capital tools, and risk data can be thin. That is why multinational development banks are experimenting with receivables discounting, pre-shipment finance, and factoring in jurisdictions where commercial appetite has been scarce.

These changing trade patterns also have direct implications for the private sector. If growth is coming from these corridors, banks and corporates need standard ways to verify data and perfect security across multiple legal systems. Without that, capital will not reach beyond the top tier of suppliers, and the promise of South-South trade will sit on paper rather than flow into production.

Asia’s new drivers and China’s diversification

Asia now illustrates the broader shift at scale, and there are three primary drivers for this. The first driver is domestic demand. Rather than exporting into the same few markets, economies from India to Saudi Arabia are building supply chains around their own consumers and regional buyers. The second driver is industry mix with investment in chips, servers, and batteries, creating fresh production footprints. The third driver is policy. Tariffs and national security measures are changing where goods are made and how they move.

Vivek Ramachandran said, “Ironically, a lot of supply chains have got longer and, in some cases, less transparent. That is the theme we will have to unbundle in the next five to ten years.” Firms are adding intermediate stops and alternative sourcing routes as country of origin rules and tariff schedules are forcing them to make new choices they didn’t have to consider a decade ago. The result is that trade flows are following foreign direct investment as capacity shifts.

China is a case study in how this looks from the inside. Exports to the United States have fallen as a share of China’s total sales, but diversification has increased. Yunfei Liu said, “The share of Chinese exports to the US has dropped tremendously,” and added that concentration is easing elsewhere too. “The share of the top five Chinese export destination countries has already dropped from around 50% to around 35%. That is decentralisation.” 

Large corporates can re-platform supply chains and open new plants. Small and medium-sized exporters struggle with partners, logistics, and regulation in unfamiliar markets. As Liu said, “The majority of Chinese exporters are SMEs. For them, to divert and find new partners is very tough – they don’t know the country, they don’t know the partner, they don’t know the new environment.” Some fall back on domestic demand until they can re-enter overseas markets.

For banks and platforms, this creates a clear brief. Help clients price and manage policy risk, build capacity in new industries, and give SMEs the toolkits to participate. Without that, the long tail will stay excluded from the very growth the region is generating.

Regional resilience in the Americas and Europe

Across the Atlantic, the predominant story is one of regional resilience. Supply chains are re-anchoring closer to end markets while still relying on long global value chains. The United States-Mexico-Canada Agreement (USMCA), the successor to NAFTA, has been a catalyst with tariffs and industrial policy reinforcing the same direction of travel.

James Fraser put numbers around the trend. “Since [the] USMCA in 2019, trade across the US, Mexico, and Canada is up 40% in five years. That has driven tremendous FDI, particularly into Mexico.” The near-shoring headline masks something else happening in Europe. As North Asian exports adjust, the European Union is absorbing more of certain categories, even as overall growth there remains muted. The effect is a widening of corridors into the EU and a tightening of production loops in North America.

Europe’s own shock therapy has been energy security, war, and transatlantic tariff frictions, and the response has been a policy focus on resilience and diversification. Enrique Jose Garcia Rico said, “Everyone in Europe is focused on how to increase resilience. Supply chains are extremely fragile.” He added a blunt assessment of Latin America’s role in this rebalancing. “If there is a winner from the current situation of the tariffs, that’s Mexico… Clients are near-shoring production centres there, and [are] using Mexico as an intermediary country.” 

Latin American exporters more broadly are seeking to reduce single-market dependence, redirecting a share of the flow toward Europe and Asia. Preferential agreements, labour and logistics advantages, and a dense web of supplier relationships are pulling assembly and intermediate processing closer to the end buyer while still drawing on global components.

For banks, that means more capex to finance, more long-term offtake contracts to underwrite, and more guarantees to backstop as firms lock in redundancy.

Planning ahead

The geography of production is shifting toward new hubs in the Global South, domestic demand is pulling supply chains inward across Asia and the Middle East, and regional resilience is reshaping North America and Europe. At the same time, chains are lengthening, adding hops and complexity, and bringing finance closer to the centre of corporate strategy.

The desired end state for many is a connected system where digital information and reliable contracts move with the goods. The work now is planning for uncertain times, and the opportunity is to use that planning to modernise the inner financial workings of trade – much as past generations did with bills of lading and uniform rules – so global commerce can grow on sturdier foundations.