To qualify for preferential duties, exporters must meet ROO rules, but these are complex – and strict compliance is essential to avoid costly customs audits. In this article, we outline what companies need to understand about rules of origin – and highlight the key points exporters must manage to avoid failing an audit.

What rules of origin actually do

Rules of origin are fundamental to international trade because they gatekeep access to Free Trade Agreements (FTAs). ROOs determine the economic nationality of a product, i.e., where a good is truly considered “from” for tariff purposes.

Rules of origin are the laws, regulations and administrative guidelines that governments use to determine an imported product’s country of origin, not always an easy matter when the raw materials, manufacturing, processing or assembly of a product can be provided in several different countries.

For example, simply shipping a product from, say, Canada to the EU, does not automatically grant it preferential treatment under the Canada European Union Comprehensive Economic and Trade Agreement (CETA).

If the product uses inputs from outside the FTA zone, it must undergo substantial transformation in the exporting country to be deemed “originating” in that country.

Exporters must meet the strict, product-specific criteria laid out in each FTA, in order for the product to qualify as “originating” and become eligible for reduced or zero tariffs.

Two main types of rules of origin

Rules of origin are generally categorized into two distinct types, each serving a different purpose in international trade: preferential and non-preferential.

Preferential ROO

These are the rules that matter most to exporters seeking a competitive edge. Preferential ROO are applied exclusively within the framework of FTAs, such as USMCA (formerly NAFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), or the Regional Comprehensive Economic Partnership (RCEP).

Meeting these rules is how a product qualifies as “originating” under the terms of the agreement, which in turn grants it preferential tariff treatment. In practice, it means that importers pay either a reduced or a zero-duty rate.

Non-Preferential ROO

Non-preferential ROO determine a product’s origin for general commercial purposes and are applied unilaterally by a country (or by multilateral organizations like the WTO) in cases where no FTA benefits are being claimed.

These rules do not usually grant any special tariff advantages, but countries still impose these rules for various administrative and trade remedy reasons, for example:

• Trade statistics: Accurate recording of import and export data.
• Country-of-origin labelling: Determining the “Made In…” label required on goods.
• Trade remedies: Applying specific measures like anti-dumping or countervailing duties against goods determined to originate from a specific country.
• Government procurement: Determining the eligibility of a product for public tenders.

While both rule types are legally required, for the specific goal of maximizing profit and offering cost savings to your buyers through lower import duties, preferential ROO are the primary focus for any company using an FTA.

How to figure out the rule for your product

Determining origin starts with classification. Every product in global trade is assigned a specific harmonized system (HS) code by the World Customs Organization (WCO).

The World Customs Organization says that,

“At the heart of international trade, the harmonized system is an essential tool for harmonizing and facilitating the movement of goods around the globe.”

The HS code is the anchor for all trade rules. Once you have the correct HS codes for your exported product, you can look it up in the relevant FTAs’ annex or schedule, which will detail the product-specific rule (PSR) you need to meet. These rules fall roughly into four categories:

Wholly Obtained (WO)

This is the most straightforward rule. Here, goods must be entirely sourced or produced within the territory of one FTA member country. None of the materials used to produce the goods can be non-originating. Wholly obtained goods automatically qualify as originating.

Clear examples include minerals extracted from the ground, live animals born and raised, or fish caught by vessels registered and flagged to that country.

Change in Tariff Classification (CTC)

CTC rules are the most common method for manufactured goods that use imported components. The core principle is that non-originating inputs must undergo sufficient production or processing within the exporting country.

In other words, the finished product is classified under a different HS code than the inputs. There is a minimum shift in classification required for this rule to apply. Depending on the rule, the required “shift” can be at a high level – implying a change in the applicable chapter of the HS code.

Some rules allow more granular changes in how to find HS code, for example, a change in subheading. It depends on the specifics of the free trade agreement.

Regional Value Content (RVC)

The RVC rule dictates that a certain minimum percentage of the final product’s value must originate from within the FTA region.

According to Export Development Canada,

“The imported components must undergo significant transformation during manufacturing to be considered as originating from the trade agreement countries.”

This rule is often used for products where a tariff shift alone is not considered a sufficient transformation. Think about really complex assemblies, such as a car or industrial machinery.

The FTA will specify the calculation method to be used, but the common ones are the transaction value method, which looks at the selling price of the product, and the net cost method, excluding costs such as marketing and royalties.

Specific Process Rules

For a limited set of international business contracts, origin is determined by requiring the completion of a specific, non-tariff-based manufacturing or chemical process.

This rule is often applied to industries like textiles, chemicals, and refined metals (steel), where the process itself is the measure of substantial transformation, regardless of the resulting HS code.

Key points exporters must manage

ROO compliance requires diligence across multiple parts of your supply chain and record-keeping system, including:

• HS code accuracy: Incorrect classification is the most common and costly mistake, as using the wrong HS code immediately leads to an inaccurate ROO determination. This can result in your buyer being denied the preferential tariff.
• Understanding the applicable rule: Different FTAs have different rules, so a product that qualifies as originating under CETA may not qualify under USMCA due to varying RVC thresholds or CTC requirements.
• Tracking inputs: For any product not wholly obtained, you must trace the origin and processing of your components. That includes where inputs are from, the relative value of each input, and its transformation status.
• Maintaining documentation: Exporters are required to keep records to back up every origin declaration, including bill of materials and supplier declarations. Cost breakdowns and production records are also critical.
• Issuing the certificate of origin: The required format depends on the FTA and can vary from self-certification (USMCA, CPTPP, and CETA) to government-authorized certificates, particularly in the case of older regional agreements.
• Importer responsibilities: The importer is the party legally responsible for claiming the preferential tariff rate and ultimately liable for any inaccuracies. Importers must retain the origin documentation provided by the exporter.

Note that under certain FTAs (like RCEP), the importer is permitted to issue the origin declaration themselves, placing the compliance burden directly on them.

Common pitfalls

Navigating rules of origin is complex, with even experienced exporters making mistakes. Common pitfalls include:

• Assuming “Made In X” means “Originating in X”: The country where a product is made is not the same as its origin according to trade rules. Something can be made in one country, but fail to qualify as originating in that country according to an FTA.
• Trusting supplier classifications: Exporters often assume the materials provided by their suppliers meet the origin criteria – but should instead verify via a formal supplier declaration or certification.
• Ignoring the De Minimis rule: The de minimis rule is a tolerance that allows a small percentage of non-originating inputs to be used without affecting the origin status, provided the product otherwise meets its ROO.
• Origin when suppliers change: A change in your supply chain, even switching suppliers within the same country, can alter the origin status of your materials.

It’s also worth noting that when a regional value content rule applies, errors in calculation, including the wrong valuation method or non-allowable costs, can invalidate the entire origin claim.

ROO knowledge is core to the correct trade declaration

Ultimately, understanding and mastering the rules of origin is just non-negotiable. Strict compliance ensures your product is correctly documented, which protects your company during customs audits.

Achieving assured originating status directly translates to financial benefits by allowing your product to access lower tariffs (often zero duties) under FTAs, which immediately helps with competitive pricing in new markets.

It’s a win-win, but the rules are complex. Close adherence is an absolute must.

The post Rules of Origin: What You Need to Know appeared first on Trade Ready.

Unfortunately, these uncertainties tend to hit small businesses the hardest. Small businesses might have thinner margins and fewer buffers in their balance sheets. They may serve customers who are finding it increasingly difficult to afford goods. Is there some practical way smaller businesses can increase their resiliency to tariff expenses, including through diversification?  

“Small business owners must plan how to respond to these new realities and the economic uncertainty ahead,” noted Rohit Arora for Forbes.

But what can that response look like for smaller businesses with less macroeconomic wiggle room?  

The real cost of tariff volatility for businesses 

Imagine a small business operating with a 10% profit margin on a product that relies heavily on international trade. A tariff increase of 20-40% on the raw materials needed to produce that product can immediately erode the margins. Small firms, dependent on long-term contracts to reduce margins, don’t always have the leverage they need to renegotiate contracts.  

If trade tensions spike, small business tariffs can have devastating impacts. 

But costs alone aren’t the only risk with tariffs. The broader tariff impacts can complicate all sorts of plans. It may be increasingly difficult to document imports and exports. Businesses may need to make new logistical decisions in response to changing costs. And if a small business has to find a new source for its products, it could upend an entire business model. 

Even if businesses can weather these storms, they can lose what created their market share in the first place.

Price competitiveness can go down. And companies may hesitate to expand to new markets because they’re uncertain about which tariffs will spike next. As the Business Development Bank of Canada (BDC) notes, “pursuing export opportunities in the EU often requires companies to navigate stringent regulations.” If you can handle these regulations, options like exporting to Europe can broaden your ability to diversify. You can think of it as “exporting risk.” 

How can small businesses handle these challenges? There are multiple items to consider that will help you build a sharper tariff strategy. 

Tariff strategy #1: Map and stress-test your supply chain 

The best thing any small business can do is understand its current supply chain. Build a map. Where are the current suppliers? What are their countries of origin? What are their shipping routes? Are there any tariff-sensitive inputs that go into making your products? These are critical questions to answer because many companies don’t realize just how many key components may originate in tariff-targeted countries. 

Next, a small business should run some stress tests.

“What happens if tariffs rise 10%? 50%?” “What if a supplier country becomes politically unstable?”

This will help you identify single-source dependencies and components without any alternative suppliers, which highlights the key risks you need to hedge against.

Tariff strategy #2: Reduce single-country dependence by looking for multi-region supplier diversification 

Now that you’ve identified the risks, diversification is the best way out. If you can source across several low-risk regions to reduce tariff exposure, you’ve already made a lot of headway. 

For example, Chile offers a highly open and stable trade regime, with low, predictable tariffs (around 6% MFN) and over 30 FTAs covering more than 65 economies, making it a strong partner to support a more diversified and resilient supply chain. 

This may require some macroeconomic and geopolitical analysis.

Look at current trade relationships and evaluate tariff history across regions with relatively stable policy environments.

For example, the EU and Chile, ASEAN and China, or the EU and Vietnam. Reviewing how these trade corridors have evolved over time can help you spot patterns in tariff exposure, policy consistency, and regional risk before making sourcing decisions. 

Tariff strategy #3: Diversify beyond suppliers by looking at multiple markets 

Diverse suppliers can help you remain resilient as a business. But what about zooming out? You may need to diversify markets if you’re going to remain tariff-proof. Multiple markets will offset your risk thanks to basic diversification: if tariffs rise with one market, your revenue can still remain stable overall. 

Expanding into additional regions, like Europe or Canada, can help spread your risk around. BDC highlights that exporting to Europe offers stable demand, for example. The downside is a heavy regulatory environment. But if you treat options like these as a part of a broader tariff strategy, you’ll realize that it’s possible to establish footholds in new markets that expand your ability to weather risk. 

Tariff strategy #4: Look for leverageable trade agreements and preferential tariff programs 

So far, the strategies mentioned have been defensive. But there are more assertive strategies for building a diversified portfolio of suppliers. 

To begin, look for any relevant free trade agreements, or unilateral preference programs, that are in place in your industry.

Are there any that reduce costs immediately? Are there unique exceptions for some products that will keep your business with a sustainable profit margin? 

You can also shift your sourcing or assembly operations to countries with more favorable agreements. Maybe the answers to the questions above aren’t favorable now. However, if you can develop a small business strategy that spans multiple countries, you may potentially benefit from lower tariffs on products assembled in specific regions.  

Tariff strategy #5: Create a real-time tariff monitoring system 

You may look at these strategies and wonder how sustainable they are if tariff conditions shift unexpectedly. It’s a valid concern. The truth is no one has a crystal ball for future tariff policy. However, you can build an advanced warning system by designating a person or a team to track tariff announcements and political developments. They may even be able to look at trade negotiations to see where specific industries may be headed. 

Look at government trade portals, international trade news, or even consider hiring consultants.

The key is to build a list of trusted sources for forecasting trade developments. You may not expect 100% accuracy, but you should look for a reliable set of sources that can decrease your risks because you feel increasingly “in the loop” for tariff changes. 

Tariff strategy #6: Price and plan for the most uncertain tariff environment 

Ever hear the phrase “hope for the best, prepare for the worst?” This is a variant of that. You may consider introducing tiered pricing strategies, or terms that allow mid-contract tariff adjustments. Customers don’t always like these, so make sure that your tariff pricing policies are clear and well-articulated at every point. 

Assess different tiers of risk and develop a strategy for each one. What happens if tariffs increase by 10%? How will you respond? And how will that response differ if your tariffs increase by 50%?  

Tariff strategy #7: Increase your operational flexibility 

The more flexible your operations are, the more quickly you can pivot if there’s a sudden tariff shift. One great starting point: modular production processes. If you can design products so components can be swapped with equivalents from different suppliers, you’ll avoid getting “locked” into any specific solution.  

Flexibility is just as important from a logistics perspective.

Can you use multiple distribution hubs (ports, warehouses, fulfillment centers) to weather a geopolitical storm?

This kind of strategy isn’t just important for tariff flexibility, but total flexibility in the face of geopolitical risks. 

Reframing tariff risks as a strategic advantage 

Tariff risks will always be there. So will the uncertainty of geopolitical risks. Global trade is shifting, and regulations are increasing. But if you can find a way to map your supply chains, diversify across both suppliers and markets, and build more flexible operational systems, you’ll shift these risks into a potential advantage. Your ability to pivot quickly could keep your prices stable in the face of future geopolitical storms, which isn’t true for every small business. 

Small businesses can’t control policy. But they can control how prepared they are for volatile policies. Build a diversification strategy that gives you some peace of mind that no matter what the next headline in international trade may read, you’re ready for it. 

The post How to build tariff resiliency into your diversification strategy appeared first on Trade Ready.

With geopolitical tensions reshaping supply chains, unilateral tariffs disrupting established trade agreements, and regulatory complexity increasing across regions, global business decisions carry more weight and risk than ever before.

According to the World Trade Organization, global merchandise trade volumes are projected to grow in 2026, but at a slower and more volatile pace than in previous decades, driven by geopolitical fragmentation and policy uncertainty. In other words: opportunity is there, but so is risk.

Against this backdrop, the most successful organizations are not asking whether they should grow internationally. They’re asking smarter questions about how.

1. What are some of the most important steps to take before venturing into a new market?

One of the most common mistakes in global expansion is reacting to opportunity before assessing readiness.

Before venturing into a new market, organizations should conduct a situational analysis, including assessing organizational readiness and planning and analyzing the results of international market research. This is not simply a planning exercise, it is a risk filter.

As the guide explains, “Before an organization embarks on a new initiative in international trade, it is important to assess the organization’s current conditions, attitudes, and resources”. This assessment helps determine whether the initiative is feasible and whether the potential gains justify the exposure.

Companies that skip this step often become reactive exporters, responding to inquiries without clear strategy or trade expertise. In today’s environment, readiness is a competitive advantage.

2. What international market research do you need to do before expanding into a new market?

International expansion demands structured research, not guesswork.

The guide outlines a seven-stage approach to international market research, beginning with defining the research objectives and progressing through stages such as screening potential markets, selecting the research design and data sources, and ultimately presenting conclusions to then apply the research. Each stage reinforces disciplined decision-making.

Beyond methodology, macroeconomic indicators play a critical role. The guide highlights key data points including Gross Domestic Product (GDP), GDP per capita, Household Disposable Income, market size, unemployment rate, population, and inflation rate. These metrics help businesses evaluate market suitability and purchasing power before committing resources.

In other words, expansion decisions should be evidence-based—not optimism-based.

3. How do tariffs introduced unilaterally by the U.S. government affect trade between Canada, the United States, and Mexico, even with CUSMA in force?

North America illustrates how quickly trade conditions can shift.

While CUSMA is designed to facilitate trade, recent unilateral tariff actions by the U.S. government (2025) have disrupted this predictability. Businesses that once relied on stable, tariff-free access have faced sudden cost increases and regulatory uncertainty.

As a result, companies must assume volatility. The guide notes that businesses must assume the possibility of future, unexpected tariffs and plan accordingly. Practical strategies include diversifying supply chains, strengthening trade expertise and maintaining contingency plans.

The broader lesson extends beyond North America: formal agreements do not eliminate political risk. Professionals must remain agile and informed.

4. What integrative export and FDI approaches can businesses employ when expanding into Asia?

International growth is not limited to exporting finished goods.

Organizations can expand through export, international transfer, international partnering, or through FDI. Within these pathways are multiple approaches: indirect export, direct export, licensing, franchising, strategic alliances, representative offices, greenfield investments and mergers and acquisitions.

Each model carries different levels of investment, control and exposure. For example, the guide explains that Greenfield/Brownfield investing is the riskiest and most expensive market expansion option. Conversely, indirect export may limit risk but also reduce market visibility and control.

Selecting the right strategy requires alignment between organizational capacity and long-term objectives. There is no universal blueprint, only informed decision-making.

5. When a company expands into a new market, how important are cross-cultural considerations?

Market entry is not only about economics and logistics. Cultural alignment can determine success or failure.

The guide emphasizes that understanding and adapting to cross-cultural differences is critical for success. Communication styles, consumer behaviour, marketing imagery and negotiation practices can differ significantly between markets. Ignoring these nuances risks damaging relationships before they begin.

Cultural intelligence reduces friction, accelerates trust-building and strengthens long-term positioning.

6. How are tariffs determined on products that are being exported?

Amid strategic discussions, technical fundamentals remain essential.

A tariff is the rate that is used to determine the amount of duty that will need to be paid to the government of the importing country when goods are shipped internationally. Tariffs are determined using the Harmonized System (HS) of nomenclature, an internationally standardized coding system. Many governments have online tools for importers and exporters to determine and obtain a HS code for their materials and products.

Accurate classification directly affects cost, compliance and clearance timelines. Errors can lead to delays, penalties or reputational damage. For international professionals, understanding these mechanisms is not optional, it is operational risk management.

A more disciplined approach to global growth

Across regions, from the United States to China, the Middle East and the Caribbean, the opportunities are real. So are the risks. Regulatory unpredictability, infrastructure differences and currency considerations all influence outcomes.

As the guide concludes, a well-informed and adaptable approach is central to long-term success.

For professionals navigating global markets today, the essential questions are not simply “Where can we grow?” but:

• Are we prepared internally?
• Do the macroeconomic fundamentals support entry?
• What risks exist within the regulatory and political landscape?
• Which market entry model aligns with our capabilities?
• Do we understand the cultural and compliance dimensions well enough to execute effectively?

Exploring these questions in greater depth, along with region-specific insights and practitioner perspectives, can help organizations move from reactive expansion to structured global strategy.

For readers interested in examining these issues further, the Essential International Trade Questions Answered guide offers additional context and practical insight drawn from experienced international trade professionals.

The post 6 Essential questions every international business professional should be asking before they go global appeared first on Trade Ready.

Operating across borders routinely exposes businesses to complex legal and regulatory friction – friction that can lead to disputes. Trade disputes create substantial risks for supply chain integrity, the ability to meet customer expectations, and for profitability.

Reactive attempts at resolution are rarely a good idea.

In this article, we will explain how companies that trade internationally can resolve and, even better, proactively mitigate common types of international trade disputes.

Jump to:

• Contract disputes
• Intellectual Property disputes
• Tariff, origin, customs disputes
• Distribution, franchise, or joint-venture disputes
• Investor-state conflicts e.g. expropriation or regulatory disputes

How does an international trade dispute arise?

An international trade dispute is a formal disagreement between entities operating in different legal jurisdictions. These disputes arise when one party considers that there is a breach of contract, treaty, or regulation – and when that breach negatively impacts their commercial interests.

Triggers vary from operational failures (such as late delivery, non-payment, or quality issues), through to complex regulatory conflicts involving tariff classifications or rules of origin.

Intellectual property rights can also come into play, while it’s not uncommon to see claims by foreign investors of unfair treatment or expropriation by a host state.

5 common trade disputes – and how to solve them

If you want to effectively manage trade dispute risk, you need to understand the potential conflict zones and their specific remedies. Here, we examine five prevalent types of international trade disputes – including actionable strategies both for mitigation and for resolution in each scenario.

1.     Contract disputes in cross-border transaction

These disputes arise when one party to an international contract fails to fulfil its obligations. Think about late delivery beyond contractual terms, late or non-payment, and quality discrepancies. It can be exacerbated by external factors such as currency fluctuations or force majeure events.

For example, consider a South American soybean exporter that faces a dispute after contracting to supply a Chinese buyer. When China imposed new tariffs, the exporter attempted to invoke a force majeure clause on the contract while the buyer refused the shipments at the new price, creating a conflict over which party bore the financial risk of the new regulations.

The soybean exporter should try to resolve matters according to pre-agreed mechanisms. Their international contract should specify governing law and jurisdiction, prioritizing alternative dispute resolution (ADR) methods such as ICC arbitration or mediation, over potentially lengthy foreign litigation.

The risk of cross-border contractual disputes can be mitigated by:

• Precise drafting: Contracts must clearly specify governing law, jurisdiction, and currency terms.
• Use of international commercial terms (incoterms): Clearly define delivery obligations and the exact moment risk transfers between parties, as defined by the International Chamber of Commerce (ICC).
• Continuous monitoring: Discovering divergence from contractual terms early on allows for implementing a fix before there is serious damage to commercial outcomes or the contractual relationship.
• Secure revenue: Mitigate non-payment risk by requiring advance payments or using secure instruments like letters of credit.

It’s also worth including force majeure and change-of-law clauses to allocate risk for unforeseen regulatory actions.

2.     Intellectual property disputes

It’s not uncommon to see an organization in another country infringing on your trademarks, patents, copyrights, or trade secrets.

Whether it’s misuse of IP or improperly licensing these trademarks across borders, there is a unique challenge here: different jurisdictions maintain varying levels of IP protection and enforcement standards.

We often see major disputes that arise even at the WTO level, such as the United States of America accusing China of inadequate IP enforcement, leading to formal complaints to the WTO.

Resolution often involves complex litigation in the infringing party’s local courts or, for systemic issues, state-to-state dispute settlement through bodies like the WTO. Preventative action against intellectual property disputes is better:

• Comprehensive registration: Register trademarks and patents in all relevant jurisdictions, not just the home country.
• Protective agreements: Utilize strong Non-Disclosure Agreements (NDAs) when sharing sensitive technology or designs.
• Proactive monitoring: Actively monitor foreign markets for unauthorized use or counterfeits to enable early enforcement.

It’s also worth ensuring that licensing agreements clearly define rights, territories, duration, and termination mechanisms.

3.     Tariff, origin, and customs disputes

Cross-border tariff and customs disputes are disagreements with national authorities over the classification of goods: including the place of origin, applicable customs duties, or import/export restrictions.

For example, a common operational dispute occurs when customs authorities at the port of entry reclassify imported goods under a different harmonized system (HS) code than declared, triggering unexpected duties and holding up supply chains.

Resolution is possible, but it involves formal administrative appeals to customs authorities – complaints that rely heavily on a verified audit trail of the goods’ journey and transformation.

Complaints can take substantial time to resolve, at best frustrating the end customer, and at worst leaving goods such as perishables unsellable. It’s a type of international trade dispute to avoid at all costs:

• Meticulous documentation: Maintain detailed records of production, value-added, and input origins to substantiate claims for free trade agreement benefits.
• Regulatory monitoring: Actively monitor applicable HS codes, duties, and regulatory changes in both exporting and importing jurisdictions.
• Risk allocation: Include specific contract clauses that allocate the financial risk of potential reclassification or new duties.

Another useful measure is to utilize trade compliance partners to build robust traceability into your entire supply chain, protecting your trade flows against regulatory disputes.

4.     Distribution, franchise, or joint-venture disputes

Cross-border partnership models such as distributor agreements, franchising, and joint ventures can often lead to flashpoints such as termination rights, exclusivity clauses, control issues, and conflicts between majority and minority partners.

Consider a manufacturer that triggers a dispute because it’s trying to terminate a contract due to a lack of delivery. The foreign distributor may benefit from local indemnity rights not explicitly addressed in the original contract, thereby blocking contract termination.

Resolution typically hinges on the governance frameworks established at the outset. Well-defined exit strategies and dispute resolution clauses are essential:

• Clear agreements: Draft contracts with precise roles, performance metrics, exclusivity terms, and termination rights.
• Upfront governance: For joint ventures, agree upfront on reporting rights, exit strategies, and protections for minority partners.
• Due diligence: Conduct thorough due diligence on a potential partner’s reputation and the local regulatory environment before committing.

As always, the most damaging disputes emerge from unsatisfactory relationships that remained that way for too long, so it’s worth maintaining regular communication and formal review mechanisms to monitor partner performance.

5.     Investor-state conflicts e.g. expropriation or regulatory disputes

Disputes with another nation-state are high stakes: whether it’s unfair treatment, breached investment treaties, or expropriated assets without compensation.

A notable example is the Methanex case, where the corporation launched a claim against the United States following California’s ban on a specific gasoline additive. The company argued that the regulation constituted expropriation of its business interests.

Investor-state cases are typically resolved through specialized international arbitration tribunals. Which tribunal is usually stipulated in investment treaties or trade agreements. It’s a long and expensive process worth avoiding:

• Treaty protection: Structure investments to benefit from applicable investment treaties that specify investor rights and protection against expropriation.
• Risk assessment: Conduct rigorous political and regulatory risk assessments of the host country before investing, focusing on stability and the history of regulatory changes.
• Dispute clauses: Include clear dispute-settlement clauses in contracts, specifying the arbitration body and seat.

Trust is at the core of dispute-free international trade, so always maintain transparent operations and good relationships with local authorities – full compliance with environmental and social laws should be a given.

Best practice as risk mitigation

Effectively avoiding the risks of international trade disputes is predicated on proactive risk mitigation. Following best practices and using practical steps will significantly reduce your exposure:

• Every international contract should define the governing law, the seat of arbitration, and the language of proceedings.
• Contracts should explicitly require the use of alternative dispute resolution (ADR) mechanisms such as mediation or arbitration before resorting to formal litigation; ADR facilitated by the ICC is one example.

• Keep meticulous documentation, certificates of origin, quality inspection reports, and communication logs as evidence for use in defending claims.
• Establish early-warning systems to monitor key indicators such as delayed shipments, payment delays, regulatory changes, and currency fluctuations.
• Be acutely aware of currency/exchange-rate risk and potential payment risks in cross-border transactions. Consider secure payment instruments like letters of credit.

By implementing these best practices, trade professionals can create resilient agreements, identify potential conflicts early, and structure their operations to minimize the probability and impact of complex international trade disputes.

The post How to handle (and avoid) 5 of the most common types of trade disputes appeared first on Trade Ready.

“Who’s paying them?”

Small businesses in the U.S. have reportedly been hit hard by the tariff announcements. Many of them import goods from overseas and are the ones responsible for paying the tariff costs, which are essentially taxes placed on foreign products brought into the import country. Big-box retailers like Walmart don’t face this same financial burden. They have the competitive advantage and the leverage to pass tariff expenses onto their overseas suppliers if necessary.

Amid new trade policies, buyers and suppliers are reviewing the terms of their trading partnerships. Some are negotiating proactive solutions in response, including how to address payment and any new added costs from tariffs.

Whether it’s the overseas supplier who will have to absorb tariff prices or the importer who ends up covering them, trade finance can be used to protect and improve cash flow for both buyers and sellers across the international supply chain.  It’s also a means for buyers and sellers to negotiate more favorable payment terms with one another, so all players can proceed with strong, stable cash flow when doing cross-border business.

Win-win tool for dealing with tariffs

For businesses trading internationally, sorting out payments during the tariff rollouts is likely a top priority. Small, midsized and larger companies are all involved in this new trade playbook and are all part of getting a product to market.

In this trading web of exporters, importers and other supply partnerships, someone will have to either absorb, pass on or split tariff charges.

Just like it has been during other supply chain events, including COVID-19 and geopolitical disruptions, trade finance can be a solid tool to help companies bridge cash flow between raw material procurement, production and payment receipt. It can be used to finance longer payment terms between the buyer and seller, so that sellers get funded right away while the buyer can pay at a later date.

Fun fact: Trade finance already supports 80-90% of global trade, according to the World Trade Organization. This financing ensures that both parties in a commercial transaction have the cash they need, especially if prices spike, like in the case of tariff charges.

Financial flexibility during times of transition

Tariffs are determined by the country of origin and the type of product being imported.

Right now, a lot of companies are talking about the uncertainty tariffs are causing for their business. Some however have anticipated tariffs and have already adjusted their business strategies accordingly, including price adjustments with suppliers, inventory stockpiling, diversifying their sourcing and supply chains, and focusing on additional markets outside U.S.

Those companies that haven’t already gotten the ball rolling on these adjustments are likely in the process of considering their options now that tariffs have shaken up trade norms.

As companies reassess their tactics, trade finance is a flexible solution that can adapt to a business’ evolving needs.

If a company, for example, shifts sourcing from one country to another, or partners with retailers in new markets, then a trade finance firm can help facilitate seamless transactions between buyer and seller – including the payment terms between the two.

The mechanics behind trade finance

Trade finance is a set of financial tools that improve cash flow, mitigate trade risk, and unlock business growth.

One type of trade finance is known as export factoring. Using export factoring, companies can sell their receivables or invoices to a financial intermediary. The financial intermediary then provides up to 90% of the invoice amount to the company upfront and in cash.

The concept behind export factoring is that businesses choosing to use it can get paid right away, rather than having to wait months to collect payment from their buyers.

For reference, recent data showed that a large U.S. buyer takes an average of 54.7 days to pay their invoices. Businesses can be strained financially if they have to wait that long to get paid.

Aside from the immediate liquidity export factoring provides, non-recourse export factoring also includes credit protection that ensures you get paid even if your customer defaults. Collection services are also part of export factoring arrangements, where the trade finance company acts as an extension of a business’s “back office”. With collections services, the trade finance company handles payment collections and supports exporters as they navigate and work with buyers in foreign markets.

Supply chain finance is another type of trade finance, but it is often initiated by the buyer, rather than the seller. Through supply chain finance, a retailer can offer its vendors early funding, equipping them with the cash to maintain operations and keep up with orders.

Like export factoring, supply chain finance helps suppliers get paid faster while giving buyers longer windows until payment is due. This dynamic ultimately allows buyers and sellers to have more cash on hand, a crucial element for general working capital – and with the handling of tariffs.

The upshot

As the tariff and international trade landscape evolves, trade finance, and the age-old technique of factoring your receivables to secure payment upfront can prove to be the right antidote to optimize cash flow.

No matter where the tide turns next, trade finance tools offer a potential safety net for companies engaged in international trade.

The post How to use trade finance tools to gain flexibility during trade policy upheaval appeared first on Trade Ready.

The WTO’s revised forecasts project modest growth in global trade, driven by easing inflation and interest rates, but caution remains due to geopolitical tensions and unresolved regional conflicts. Emerging markets, particularly in Asia, the Middle East, and South America, are set to lead growth, while advanced economies navigate persistent inflation and evolving supply chain dynamics.

From the potential impact of U.S. trade policies under the incoming Trump presidency, to the continued growth of e-commerce and technological innovations in trade finance, the year promises to reshape global commerce.

Risks such as economic downturn, supply chain disruption, and geopolitical instability create an atmosphere that highlights the need for agility, adaptability, and diversification in 2025.

Read on for our 10 2025 trends.

Curious about our past predictions? Check out what we thought 2017-2024 had in store.

• 10 global trade trends we’ll be watching in 2024
• 10 global trade trends we’ll be watching in 2023 
• 10 global trade trends we’ll be watching in 2022 
• 10 global trade trends we’ll be watching in 2021 
• 10 global trade trends we’ll be watching in 2020
• 10 global trade trends we’ll be watching in 2019
• 10 global trade trends we’ll be watching in 2018
• 10 global trade trends we’ll be watching in 2017

1. Global trade growth expected amidst transition and uncertainty

In October 2024, the WTO released their revised global trade outlook for the remainder of 2024, and looking ahead at 2025. In it they increased the growth forecast for world merchandise trade in 2025 by 0.3% from the previous estimate, bringing it to 3.3%.

The WTO clearly pointed out that the risks to this forecast were for growth to be slower, rather than higher. Meaning that uncertainty in geopolitical tensions, policy (this was before the results to the U.S. federal election were known), and regional conflicts could end up reducing growth, despite the predicted increase.

However, the WTO does see gradual trade recovery continuing in 2025 among declining inflation and therefore lowering interest rates, which generally stimulate consumer spending and investment.

Overall, it looks like 2025 will be another active and transitional year for trade.

2. Stubborn inflation and uncertainty in 2025 global economic outlook

Global inflation is slowly coming down from the global peak of 9.4% in 2022 during the pandemic. The global inflation rate is expected to come in around 4% during 2025 according to the IMF.

Most of the advanced economies will come in under 2% in 2025, with developing economies averaging just under 6%.

The major central banks including the Federal Reserve, Bank of England, Bank of Canada, and the European Central Bank are all expected to continue to ease their interest rates over the course of 2025.

While the supply chain disruptions that brought inflation up to its 2022 high have mostly been resolved, new risks remain in play, as we’ll discuss in more detail later in this article. The above-mentioned geopolitical and trade tensions could have an upwards impact on inflation as well.

Modest growth is the overall prediction when it comes to the global economy in the year ahead, particularly in emerging markets. The caveat being that challenges remain, and there is still a significant amount of transition and uncertainty in the global environment that throws risk at any solid economic prediction.

3. Enhanced customer service in e-commerce delivery

The pandemic accelerated a shift in consumer behaviour, driving widespread adoption of e-commerce, particularly for “big and bulky” items like furniture and appliances. Today, online shopping continues to dominate with consumers expecting streamlined delivery experiences, including real-time tracking, timely scheduling, and exceptional service.

For retailers, delivery is no longer just about price but providing seamless customer experiences. This trend has intensified competition, especially as giants like Walmart and Amazon are projected to dominate 60% of online retail by 2027, prompting smaller retailers to prioritize affordability, speed, and personalized service.

Technological integration is key, and many retailers are bringing in platforms and tools that can enable real-time visibility, automated operations, and flexible scaling for peak periods. Companies are also enhancing services, such as pre-assembly and installation, to meet evolving consumer expectations. However, challenges remain, including rising operational costs, workforce shortages, and the need for advanced supply chain solutions.

Despite hurdles, the last-mile delivery market is poised for growth, driven by increasing online sales of bulky goods. Companies focusing on consumer trust, technological innovation, and efficient operations are likely to thrive in this competitive landscape.

4. Threats of supply chain disruptions continue in 2025

Many of the supply chain disruptions that plagued shippers throughout 2024 continue to threaten operations into 2025, including Red Sea diversions, the risk of labour disruptions, and tariff threats. This means fluctuating demand and high rates are likely for the year ahead.

To mitigate the risk of delays and disruption companies are turning to “frontloading”, filling their warehouses early to ensure they have access to the inventory they need to serve their customers, ahead of any incoming tariffs.

Canada just weathered a difficult holiday season with the Canada Post strike impacting deliveries during peak season. This labour disruption is estimated to have cost more than $1billion dollars in damages to small Canadian businesses, according to the Canadian Federation of Independent Business.

In the U.S., the USMX – the union representing container shipping lines and port operators along the East and Gulf Coast ports – are currently on a short-term contract extension that is set to expire on January 15, 2025. If they fail to reach an agreement with the International Longshorement’s Association (ILA), any resulting labour action could disrupt almost 50% of U.S. ocean freight volumes.

Between political, environmental, and labour disruptions, things remain uncertain in the international supply chain industry in 2025.

5. Trade Wars & Tariffs & Trump

Donald Trump’s second presidential term may bring significant changes to global trade policy, including increased tariffs and retaliatory measures. These actions are expected to heighten global economic uncertainty, disrupt supply chains, and strain international trade relationships. Analysts predict tariffs could be used as leverage in negotiations on issues like immigration and foreign currency policies.

Europe, already grappling with internal political challenges, faces particular risk with U.S. tariffs. These measures could reduce European exports, hamper economic growth, and complicate efforts to stabilize the eurozone economy.

China, a primary target of U.S. trade policies, may retaliate by targeting American agricultural exports and diversifying its trade relationships. Countries like Mexico and Vietnam could benefit as companies seek alternative supply chain locations.

U.S. corporations dependent on global supply chains are preparing for potential disruptions, while economists warn of unintended consequences, including higher consumer costs and distorted production networks.

The possibility of widespread retaliatory measures raises fears of a global trade war, with Europe, China, and North America among the most affected regions. But going into the start of 2025, it remains uncertain whether Trump will follow through on these threatened tariffs and to what degree.

6. Digital transformation in trade finance technology

Despite an incredible amount of work being done, the digital transformation of trade finance is a slow process. The complexity involved in creating and standardizing policy, regulations, systems, and languages presents enormous challenges. But progress continues to be made.

According to Euromoney, major financial institutions including DBS, ING, Lloyd’s and Santander are seeing 30-70% of trade transactions initiated digitally.

Among TradeReady’s most-read articles of 2024 were 2 articles focused on TradeTech and electronic trade documentation. So we know this is a topic to keep up with in 2025.

We’ll be checking in with CITP Craig Atkinson, an active member of the WEF’s TradeTech community, throughout the year for further developments in digital tools that will help businesses trade more easily, effectively, and efficiently.

7. Growing focus on skills-based hiring and retention in global trade roles

“Skills-based hiring”, or hiring based on evidence of a candidate’s specific skills rather than years of experience or formal education, has been a growing trend since the term was first coined back in 2012.

The upsides include a decrease in turnover, reduction in training time and cost, increased productivity, and universality (a more standardized process of finding a vetting candidates makes hiring easier and increases inclusivity).

For international trade roles especially, the complexity and specificity of skills needed to successfully complete trade transactions and processes makes this hiring strategy particularly useful.

And this trend is growing worldwide:

• This study found that 79% of companies now look for skills when hiring, vs. 21% that prioritize experience and education.
• Between 2017 and 2019, 46% of middle-skill and 31% of high-skill jobs moved away from requiring job applicants to have a formal college education.
• In India, where 50% of recruiters use skills as a key factor when searching for candidates, skills-based hiring is also on the rise.
• In 2022 the US government released new guidelines on applying a skills-based approach to hiring for federal positions.

In 2025, “right-skilling” will be a top trend in talent acquisition as companies continue to focus more on finding the right people for the job, rather than the right degree, or years of experience.

Secure, verifiable digital credentials will continue to play a key role in the finding and hiring of individuals with the right skills to do the job in the year ahead.

8. Regional trade growth

In 2025, global trade growth is projected to be led by emerging markets in Asia, the Middle East, South America and the CIS region. As a result of expected incoming tariffs for goods entering the U.S. market from major trading partners like China, many companies are looking for new manufacturing locations. This could continue to benefit other manufacturing regions like Vietnam.

Overall, according to the World Bank and the World Trade Organization (WTO), global trade is expected to increase in 2025, with the following regional trade forecasts:

• Asia: The fastest growing region for exports and imports, with a 4.7% increase in exports and a 5.1% increase in imports
• Middle East: The fastest growing region for imports, with a 9.0% increase
• South America: A 4.6% increase in exports and a 5.6% increase in imports, but a small decline in exports (-0.1%)
• CIS region: A 4.5% increase in exports and a 1.1% increase in imports
• Africa: A 2.5% increase in exports and a 1.0% increase in imports
• North America: A 2.1% increase in exports and a 3.3% increase in imports
• Europe: A -1.4% increase in exports and a -2.3% increase in imports

Friendshoring, nearshoring, and supply chain diversification will likely continue to transform global value chains in the year ahead.

9. WEF’s top 10 global risks

The World Economic Forum puts together an annual list of the most urgent global risks that organizations face in its Global Risks Report. As we await the release of the 2025 report in January, we can expect a continuation of many of the risks expected to be forefront in the time period of 2024-2026 listed in last year’s report.

These risks included, in descending order:

1. Misinformation and disinformation
2. Extreme weather events
3. Societal polarization
4. Cyber insecurity
5. Interstate armed conflict
6. Lack of economic opportunity
7. Inflation
8. Involuntary migration
9. Economic downturn
10. Pollution

As you peruse the list, you’ll see that several of them are already included in the top international trade trends we’ll be watching in the year ahead. We’ll be ready for updates in January.

10. AI use-cases for trade activities

Artificial intelligence is ubiquitous, groundbreaking, a timesaving gamechanger, a cybersecurity and intellectual property nightmare, it’s good, it’s bad, it’s ugly. It’s everywhere. And it’s certainly not going away in 2025, despite some backlash.

Within the international trade environment we’ll be following along with AI developments and use cases in the following areas:

• AI in hiring processes
• AI in supply chain visibility
• AI in supply chain management & sustainability
• AI in customs & documentation
• AI in inventory management
• AI in demand forecasting
• AI in trade finance

The post 10 global trade trends we’ll be watching in 2025 appeared first on Trade Ready.

When mitigating the impacts of increasing tariffs, organizations need to consider 4 important levers – procurement costs, supply chains, customers, and competitors.

Lever 1: Procurement Costs

For larger organizations such as Ford or GM with products integrating parts such as microchips, drives, and other critical components, tariffed materials may account for up to 10-15% of costs.

For small players, like metal stamping, material costs are unlikely to be significantly affected by increasing tariffs. In this case, suppliers will likely be domestic and they in turn are unlikely to face tariffs.

Organizations should:

• Ensure sources of expertise are accessed during the evaluation process, including engineering, manufacturing, legal, regulatory and commercial teams
• Evaluate the impact of an increase in the cost of raw materials throughout the production chain – for example, the impact of steel and aluminum tariffs from China could increase raw material costs by 2 to 5%
• Undertake risk analysis to identify the cost impact of different tariff scenarios
• Focus on total cost of ownership, not just prices to understand the actual impact of tariffs relative to costs

Lever 2: Supply Chains

With few alternatives, or with significantly limited capacity, we would expect costs to rise even more severely throughout the supply chain than would be indicated by the tariffs alone. Margins should be locked in by seeking long-term contracts with suppliers and buyers, so that uncertainty is reduced.

Supply chains that involve sourcing from providers whose goods and materials may be subject to increasing tariffs will need to evaluate which suppliers will pass on the tariff load and, if so, explore alternatives.

Organizations should:

• Deepen relationships with existing suppliers to identify joint solutions to mitigate the impact of tariffs
• Switch suppliers – identify the long-term supply chain risks, including the impact a supply shortage would have on manufacturing and operational costs
• Make engineering changes so that non-tariffed substitutes can be used
• Negotiate with suppliers to share in the tariff burdens
• Work with existing suppliers to source from factories they may operate in non-tariffed countries
• Insource – look for existing opportunities to produce items that were previously outsourced
• Seek product reclassification to place items outside the tariff bucket (e.g., specialty steel may also qualify for tariff exemptions so that in such cases, prices would not be impacted)

Lever 3: Customers

When evaluating if and how much of the cost increases can be passed along to customers, it is critical to consider how responses to price will vary. This depends on the relative value they ascribe to your products and their ability to source elsewhere.

Organizations should try to predict customer behaviour:

• If your product is key, or it cannot be easily substituted, or switching represents a significant risk, then customers will likely be less price sensitive (e.g., where switching products can be difficult or illegal)
• Conversely, if there are readily available substitutes, or customer margins are tight, or you sell large volumes that are not critical to their own activities, expect price sensitivity

Lever 4: Competitors

While competitors will also face the same tariff pressures, they may be impacted differently. Their responses may differ depending on their own cost structures, objectives, supply chain options, target markets and customers, geographic considerations, regulatory implications and strategies.

Organizations should:

• Look at previous competitor actions to determine which markets or customers are viewed as critical

Also, competitors may try to minimize price increases in critical markets while countering the impact on their bottom line by increasing prices more in other markets.

Organizations should:

• Understand key markets and develop pricing strategies based on which markets are critical and prepared to defend them given competitors’ objectives and strategies

Which lever(s) will work best for your business?

Overall, it’s important for businesses to make decisions that provide them with flexibility, given the continuing uncertainties with respect to tariff policies. Procurement organizations must ensure that mechanisms are in place to monitor changing developments, disseminate that information to key stakeholders, assess the potential impact of changing tariff policies, and use the four levers to mitigate the impact.

The post 4 procurement and pricing strategies to mitigate the impact of increasing tariffs appeared first on Trade Ready.

In the current international business environment, heightened customer expectations impact every part of the supply chain. At the same time, next-generation delivery and logistics management solutions are making global supply chains smarter, faster, more customer centric, and sustainable. Here are six trends to pay attention to in the world of global supply chain management for 2020 and beyond.

1. Using green logistics to cut costs and win customers

Logistics companies are integrating sustainability efforts into their overall strategy, motivated by keeping the environment “Green” and eliminating pollution. The trend is often referred to as “Green Logistics”. This will not only help the environment, but also it will enhance corporate reputations, lower supply chain costs and most importantly increase customer loyalty.

2. Supply chain integration an increasing focus for large companies

The enhancement and improvement of technology has played a major role in changing supply chain processes. Recently, top ocean carriers have started trying to move increasing numbers of documents through online processes, with the goal of streamlining the entire supply chain.

Maersk and DAMCO are two of the world’s leaders in moving containers, and their idea is to double down on the logistics processes with higher integration of inland services. This will help shippers to route their transportation at reduced cost, as the two companies have planned to connect sea and land, beyond the port of call. Alongside that initiative, digitization plays a huge role for them as it helps them to access to real-time data and information, create more agile and efficient processes and operations and more importantly, develop a more flexible “Elastic Logistics” strategy.

3. Is TradeLens technology the tool of the future?

A lack of visibility and transparency affects end to end supply chains negatively. Professionals are now trying to minimize risk and get the results for the whole process in one go!

TradeLens is a new software powered by blockchain technology, which will support global trade as a possible single platform to track the end-to-end shipping journey, making the entire process more transparent. Carriers, major shipping lines, ports, 3PLs, freight forwarders and other shipping and logistics players would all share and use the one single portal to update their customer.

Though it’s going to help for tracking freight, continued access to and use of the information is crucial. While streamlining the inventory management and improving the asset utilization is important factor for logistics, it’s important to keep an eye out for any downsides for customers and the industry as a whole from continued adoption and usage of this tool.

4. The hidden costs of taking humans out of the equation

While many companies are moving to an increasingly digital workflow to reduce costs, in my opinion going digital is itself a big cost as investing in technology would be. While it will be beneficial at some point, investing in infrastructure and training humans will help to increase the productivity of supply chain and eliminate the additional cost of maintenance.

This lack of infrastructure and service can lead to rising costs. Several carrier charges double the money for a simple local delivery, and include high fuel rates and excessive bunker charges. All 3PL try to minimize the cost and work efficiently, but due to high amount of load and issues, even 3PL are helpless and clueless when it comes to booking the carrier for the load. They tend to charge high and here company tries to utilize its all the resources book the lowest carrier on time.

Investing in infrastructure and delivery options will ease this, and is leading to exploration of alternatives to traditional delivery. For instance, drones have started playing a huge role in the supply chain industry. This would highly impact the trucking industry, as drones could be the future for delivering goods.

5. Increasing numbers of partnerships to reduce logistics costs

The aim of any company’s logistics strategy is to minimize the freight cost and provide highly efficient service. Partnerships will often not only help to reduce the costs, but also minimize the risks associated with shipping cargo. In some cases, an effective partnership can also decrease delays in delivery and enhance customer value and satisfaction.

In international markets, companies are trying to find partners that use innovative digital solutions which will help them to seek new opportunities. Increasing forecast accuracy, reducing inventories by using JIT (just in time) system, gaining new, more accurate delivery ETA estimates and decreasing the amount of required administrative work are a few of the crucial areas businesses aim to address through partnerships.

6. Will tariffs reduce business competition?

New trade disputes are impacting operations as well. Due to Trump’s new tariff policies, B2B and B2C supply chains alike are greatly affected. Retailers are worried about the how rising tariffs will escalate prices and reduce consumer demand. In some instances, this could leave fewer businesses still able to compete and may even result in a monopoly in particular industries.

The post 6 global supply chain trends to watch in 2020 and beyond appeared first on Trade Ready.

Despite the fact that international trade is more streamlined and interconnected than ever before, there are still a number of issues prevalent in the industry right now. These issues are creating problems and making things more difficult for supply chains around the world to function at optimal levels. Here is a look at three of the most important issues that are affecting global trade right now.

1. Rising tariffs

As the world’s largest economy, the United States has a lot of economic power and influence. However, under President Trump, the United States has decided to engage in a series of trade wars, using tariffs as its main weapon. Throughout his campaign, Donald Trump repeatedly stated that he believed that the United States was suffering from a series of bad trade deals and currency manipulation tactics from nations such as China.

Once he got into office, President Trump started imposing several different tariffs on imported goods. He justified them as an attempt to make trade conditions more favorable for the United States.  In the past two years, Trump has put 10-25 % tariffs on hundreds of billions of dollars’ worth of Chinese goods. These goods include solar panels, steel, aluminum, and many others.

In response to these tariffs, China has also put tariffs on hundreds of billions of dollars’ worth of American imports. Currently, the United States has more tariffs on Chinese goods than China has on U.S. goods. However, this tit-for-tat trade war seems to have no end in sight. Now China has put a ban on buying U.S. agricultural products and has also devalued its currency as a further attempt to win the trade war with the United States.

This protracted trade war is disrupting the free flow of trade between the world’s two largest economies. This trade war and its consequences will be felt around the world for some time to come. The levels of trade that exist between the two nations will impact many other countries.

2. Intellectual property theft and counterfeiting

This issue also is primarily between China and the United States. President Trump has accused the Chinese of participating in rampant intellectual property theft via cyberattacks and forced technology transfers. Many different parties have accused the Chinese of counterfeiting numerous brands and products.

The continuous theft of intellectual property by Chinese companies is a very serious issue. Even China’s President Xi Jinping has spoken out against it and expressed his belief that stronger punishments for infringement and violators are needed. The Federal Reserve Bank of Minneapolis conducted a study in 2015 that determined that roughly half of all of the technology owned by Chinese companies was obtained by foreign companies.

IP theft is a major global trade issue because companies are unlawfully profiting from breakthroughs made by other companies. The incentive for business to innovate reduces and often leaves markets flooded with counterfeit products. This increases competition, thus reducing prices for businesses who spent the initial research and development money to improve their products. These businesses should therefore be able to charge more to recoup those costs of development.

When nations believe that other nations are stealing their trade secrets, the consequences can be severe. For example, President Trump claimed that one of the primary reasons why he levied such strong tariffs on China was to get back some of the money that American companies lost through intellectual property theft by Chinese corporations.

Despite the growing awareness around the issue and actions being taken to deal with it, intellectual property theft continues to be a major issue. In fact, multiple Chinese citizens working for Apple as engineers were recently arrested for attempting to steal trade secrets from Apple regarding the company’s upcoming autonomous vehicles.

3. Governments confiscating shipments

Although international trade companies have long been forced to worry about pirates from places like Somalia interfering with shipments on the oceans, governments are now actively intercepting vessels and their cargo on a much larger scale. For example, the nation of Iran has recently seized three oil tankers in the Persian Gulf.

Iran is doing this as a retaliation for the strict sanctions that the United States government has placed on it. Trump’s sanctions are an attempt to choke off Iran’s oil sales, which are the backbone of its economy. President Trump has long criticized the 2015 nuclear deal that was struck between the two nations, and is using the sanctions to try to pressure Iran to renegotiate the deal.

The recent seizures made by Iran have irritated President Trump. As a result, he has appealed to the United States’ Western allies to create a military force that can guard vessels passing through the Strait of Hormuz and other dangerous Middle Eastern waterways. Some of these allies, such as Germany, have said no.

It appears that many nations do not want to partake in the conflict between the United States and Iran.  Considering the fact the United States’ previous long, drawn-out conflicts with Middle Eastern nations were extremely unpopular with many nations, it is not a surprise that countries are not rushing to join the United States in a military conflict with Iran. This is especially true considering the fact that nuclear weapons are at the heart of the conflict.

There’s still lots of hope for the future of trade, despite current tensions

Thanks to increases in modern technology, international trade is still thriving. However, the extensive amount of rising tariffs, counterfeiting and intellectual property theft, and government seizures of vessels are all creating problems for global trade right now. These problems appear to revolve mostly around three nations: the United States, China, and Iran. All three of these nations have vastly different political ideologies and all three are very powerful.

It is unclear how the three nations will resolve the tension in the future. However, for people around the world who work in and depend on global trade, export numbers continue to grow worldwide. With new trade deals signed regularly, the hope will be that current problems can be solved quickly and peacefully.

The post 3 key issues affecting global trade right now appeared first on Trade Ready.

When looking at international trade as a whole, one of the several contributing factors that can lead to sudden fluctuations is political uncertainty, particularly between the world-leading superpowers. As the U.S. and China continue to apply new tariffs and impede trade with one another, we will be looking into their building trade war and how this is affecting international trade.

The impact on businesses

The U.S. and China trade war has been running on for a while now, with over 300 days’ worth of negotiations and increasing tariffs. But how has this affected business as a whole?

When you look at business in the U.S., as well as internationally, it is smaller self-made businesses that have taken the hit first. With many losing the money that they are putting into their businesses, small business owners are seeing an increase in costs without the increase in sales. Though this is not the case for every business, price increases are seeing some small business begin to struggle.

Changes to personal finances are affecting businesses too

In addition to the impact that the trade war is having on business directly, it is also important to note the indirect impacts on businesses as the personal finances of their customers are affected.

As trading tariffs continue to escalate, there can be a knock-on effect such as increased prices for necessities like fuel, as well as a wide variety of imported goods. As the price for necessities such as fuel continues to rise, economic growth can slow and many begin to struggle with their finances. While some consumers continue to spend with quickly approved same day loans or easy credit options, many consumers opt to put alternative saving techniques in place to ensure their ability to cover the rising prices without putting themselves in financial risk.

As prices increase and customers become more averse to spending, many businesses may find sales decreasing and costs increasing, a dangerous scenario for any business.

The hesitation to invest

With tariffs now set on $250 billion dollars of Chinese goods, with plans for more on an additional $300 billion of goods, and a tariff on $110 billion set on American goods, this tariff war has shown no sign of slowing down.

This has led many businesses to be hesitant to invest. As a result, there has been a drop in tech deals year to date compared to years past and is only set to decrease. This presents issues for tech giants such as Apple and Samsung, as their parts and phones are produced in China. As this political uncertainty continues to escalate, their stocks took a hit but soon recovered, However, this sharp fluctuation is leading many to hesitate when investing in certain markets.

Reduction in supply and demand

The final way that the U.S.-China trade deal is affecting international trade is the reduction in demand for many products. With China’s weak exports in the first half of 2019, this could mean problems for a number of their major trading partners, as the technology industry and other major fields will begin to feel the pinch. However, there has also been an 8.1% drop in exports from the United States, demonstrating a drop in the demand and the significant damage being done to both sides by this ongoing trade war.

As tariffs continue to rise and exports drop, a number of major companies will have to start to pay more. This has already started to take effect in the U.S. as the economy has begun to slow, affecting industries like construction, which relies on imported materials such as aluminium and steel. With technology expenses already on the rise, tariffs could further increase expenses and cause technology, fuel and other necessities to increase in price, and exacerbate the existing decrease in demand even more.

As this trade war continues with no deal in sight, this could have a profound effect on the global economy. Only time will tell whether this is set to improve or not following the next round of negotiations. Where will you start in adapting to this new economic reality?

The post How is the U.S.-China trade war affecting international trade? appeared first on Trade Ready.