Political and geopolitical change is being viewed as the most significant risk factor in global business this year, according to a straw poll of traders.
Over four billion people are forecast to be going to the polls this year, including significant elections in the US, UK, EU and India.
Over half (54%) of delegates on a webinar hosted by the Institute of Export & International Trade (IOE&IT) yesterday picked potential domestic and overseas political change as the factor that could ‘increase the risks around international trade most this year’. A quarter (25%) listed ‘supply chain disruptions’ with an eighth (12.5%) saying the ‘weakening global economy’.
A vast majority (75%) of the delegates said they thought risk around trade is likely to increase this year, with 37.5% strongly agreeing with this view. Only 2.5% disagree with this shift, with 22.5% neutral.
Different philosophies
Grace Thompson, IOE&IT’s UK public affairs lead, spoke on the webinar on ‘Anticipating change and managing risk in trade in 2024’ and pinpointed the US election as one that could have an impact on the global trade landscape.
“We’re seeing the Republican presidential candidate Donald Trump making statements that, if he were to become president again, he would go further in the trade wars he initiated in his first term, including tariffs placed on European aluminium and steel.
“While Biden did keep in place Trump’s tariffs on imports from China when he came into office, he suspended the 25% tariffs on European steel and the 10% duties on European aluminium.
“So this is an example of how a different trade philosophy between candidates can impact the international trade stage on which the UK operates.”
US-China risk
Professor Trevor Williams, another panellist on the webinar, agreed that geopolitical changes could be significant for trade this year – particularly any further heightening of tensions between the US and China.
“If Trump reimposed higher tariffs on China, for example, that would be a big shock to the world economy. If China invaded Taiwan, we would have a 2008-level event.
“The Chinese economy is responsible for producing around a third of all global manufactured goods, so any conflict between them and the US would be an absolute disaster for all of us.
“That’s an unlikely scenario, but that’s still a high enough risk for businesses to take into account.”
Interconnected
Nnamdi Ahuchogu, a specialist risk engineer at Zurich Resilience Solutions, raised the point that it was important to remember that different risk factors are “interconnected”.
“The majority of risks are interconnected and in some cases there’s a cause and effect relationship between these risks.
“For example, economic downturns can be a consequence of the effects of inflation and, in turn, this can have knock-on effects such as increased debt and the devaluation of assets.
“There’s a high likelihood that there is no sector of the economy that escapes without some level of risk impact – that’s the reality of the risk landscape we find ourselves in today.”
Ahuchogu’s colleague, Peter Dee, a national retail broker manager at Zurich Resilience Solutions, also spoke on the webinar.
Support
The webinar was hosted in partnership with The Bletchley Group, which is working with IOE&IT to “offer independent insurance solutions” for IOE&IT members.
Its sales director, Angela Irvine, was also a panellist, and said:
“We’re the partner broker to the IOE&IT, bringing various risk management solutions and insurance offerings to IOE&IT members.
“Risk is high on everyone’s agenda and we can support with various insurance solutions to assist business with the challenges they face when trading internationally.
“This includes marine cargo, trade credit, political risk, cyber liability to name but a few solutions.”
You can read more about The Bletchley Group’s insurance support for IOE&IT members here.