Expert roundtable

International trade

Geopolitical trends in trade: the implications for corporates

Container cargo ship for import-export, concept logistics and transportation in the international scene

Disruption has been the defining feature of a tumultuous year for international trade. But while volatility presents plenty of challenges, it also creates opportunity. At a recent roundtable, Commerzbank experts from across the globe came together to discuss the impacts of geopolitical trends in trade on different regions and supply chains, and to share their outlook for the future of trade.

At the table:

  • Christian Toben, Head of Financial Institutions, Emerging Markets
  • Kristina Holzhäuser, Regional Head, Africa & Middle East
  • Ivica Langauer, Regional Head, CEE & CIS
  • Juan Lӧhnert, Regional Head, Latin America
  • Franz Murr, Regional Head, Asia

Global markets have faced significant disruption this year following Russia’s invasion of Ukraine. Beyond the immediate implications of the conflict, several well-established trade links have now been cut.

What are the repercussions for multinational corporates?


Ivica Langauer: The fact that trade routes are shifting is not a new phenomenon. For years now, we have seen Russian businesses moving away from Western suppliers, turning predominantly to China instead. This trend has been supercharged by the ongoing war and resulting sanctions.

What is a shock is that the overland trade corridors from Western Europe to China – which make use of Ukraine, Belarus and Russia as transit countries – have closed almost entirely. This represents one of the most sudden and drastic changes to trade corridors we’ve seen in a long time. Circumventing these interrupted trade links will inevitably involve longer, less efficient trade routes.

Christian Toben: Beyond these more immediate effects, the conflict has also prompted a real shift in foreign trade and policy in Western Europe. Trade routes that have so far seen little integration with international supply chains could come into focus, creating opportunities for new players to enter new markets. Ultimately, it is too early to say what those new trade corridors might be – but traders must be prepared for the changes to come. We remain in constant dialogue with our corporate clients throughout this uncertainty, providing support and leveraging our network as they seek alternative markets.

With regionalisation a growing topic for discussion in trade, have current events put into question the supposedly unstoppable advance of globalisation? If so, how will corporates’ supply chain planning be affected?

Christian Toben: Globalisation will not stop – but it will adapt. With security of supply now at the top of the agenda for many, we may see the concept of “near-shoring” evolving into “friend-” or “ally-shoring”. By trading with countries that share similar values, political institutions and strategic priorities, supply chain risk can be mitigated. But equally, producers should not simply swap dependency on one market for another.

Juan Löhnert: I agree. There will be a stronger focus on diversification and sourcing different trade partners going forward.
So while manufacturers will continue to outsource production, they will probably not rely on China as much as they did previously. Perhaps some capacity will be transferred to India, Africa and, hopefully, Latin America instead. We won’t see production coming back to Germany, for instance, because the labour force is very expensive and the resulting products wouldn’t be competitive.

Ivica Langauer: Precisely. If you consider existing inflation concerns in Europe, bringing production back – which would see many everyday products double, triple or quadruple in price – would be completely unsustainable.

Christian Toben: The effects of the pandemic and the more immediate impact of the war have exposed the vulnerabilities of long global supply chains and the popular “just-in-time” (JIT) approach to production; demonstrating that they can be prone to failure and present many risks. Together with a lack of availability of raw materials, this has an immediate impact on manufacturing and production processes, in Germany and across the world.

A good example is the recent disruption to the German automotive industry, which resulted in part from the fact that the majority of its wire harnesses were manufactured in and supplied by Ukraine. A small component, but one that has had an outsized impact, shutting down entire production lines.

Surveys have shown that up to half of all companies are contending with supply chain disruption and raw material shortages. These challenges will drive widespread change. Whereas previously, the most important criterion in supply chain selection was maximising working capital efficiency – hence the JIT approach – priority will shift towards procurement security. Supplier loyalty will continue to gain importance, storage will increase and financing structures will change.

Change is inevitable and has always been a feature of global trade. But what’s different today is the pace and frequency of change. The time that market players have to adjust is therefore becoming shorter and shorter. Banks must be prepared to support their clients in new ways, becoming faster, more flexible, and offering the working capital solutions that corporates need to build more resilient supply chains and grow their business.

The ongoing conflict has truly global ramifications. How are different markets mitigating the challenges? Does the change present any opportunities?

Juan Löhnert: Virtually every country that engages in cross-border trade is affected by the war and resulting sanctions, and emerging markets are being put under considerable pressure. As with every crisis, different markets are impacted in different ways, and some are more exposed than others. Paraguay, for instance, was heavily reliant on its meat exports to Russia. The unique circumstances of each market mean clients’ approaches to mitigating challenges or seizing upcoming opportunities will be extremely varied. With respect to opportunities, Venezuela, for example, has the potential to evolve from being internationally isolated and suffering from economic sanctions, to being able to export its oil across the globe.

Franz Murr: From an Asian perspective, three key trends have emerged, relating to imports, exports and production. Firstly, some markets have chosen to halt non-necessary imports. Sri Lanka, which is struggling to keep up with high energy and food prices to the point of defaulting on its debt, is one example. Pakistan has also stopped importing luxury items, including cars, due to its low foreign currency reserves. This, in turn, impacts exports of other markets.

The second trend is export restriction. India, for instance, has stopped exporting wheat to curb food shortages within its own borders.

Thirdly, there are ongoing impacts of COVID to factor in. Severe lockdowns in countries such as China and Vietnam meant that some industries were relocated elsewhere to keep production going. Vietnam saw a significant portion of its sizeable textiles industry move to Pakistan and Bangladesh, for example. And now that the business is there, it will likely stay there to some degree for some time to come.

Kristina Holzhäuser: There are two sides to disruption. What may create obstacles for some can generate opportunities elsewhere. With regard to Africa, the region has the chance to make use of the current crisis. In fact, what COVID did for digitalisation, the war in Ukraine may do for the energy transition, and Africa is well placed to accelerate its roll-out of renewable energy.

The risks of fossil fuel reliance have become clear, and all the countries that depend on costly energy imports are now likely to invest even more heavily in renewables. Parts of Africa stand to benefit massively due to the immense potential for wind, solar and hydropower, which, as technology advances, could also be used to produce green hydrogen. With the right investment, we could see countries such as Morocco, Namibia, Egypt and Kenya become global hubs for clean energy.

Juan Löhnert: Ivica previously mentioned the global impact of inflation, and that is something to consider here too. As interest rates begin to climb following years of historic lows, investors could in theory be less inclined to deal with emerging markets as they opt for the relative safety of larger economies. But instead, rising interest rates will more likely make investors make a point of differentiating between markets, and become more discerning as to which offer better investment opportunities. With its extensive network of regional experts, Commerzbank is on hand to offer the advice and solutions that companies need to reposition in a complex, fast-changing world.