HKTDC Research recently held a webinar on “Successful Global Supply Chain Management in Uncertain Times”, with experts invited to give an overview of the latest developments in international geopolitical tensions and several US traderelated issues. Companies were also offered practical solutions to help them comply with trade requirements and mitigate risks.

Rising Geopolitical Risks and Trade Restrictions Change Business Landscape

Nicholas Fu, Senior Economist (Global Research), HKTDC Research, told the webinar that geopolitical changes over the past decade have directly affected prices of traded goods. Traders have been particularly concerned in recent years with the sustained tension in SinoUS relations, the ongoing RussiaUkraine war and conflict in the Middle East. Taking ChinaUS trade as an example, Fu said: “Trade frictions between these two countries have again intensified since 2022. This has not only affected SinoUS trade relations but has also led to adjustments of related policies and restrictions towards mainland China by allies with close economic and trade ties with the US such as the EU. This has undoubtedly posed additional risks to Hong Kong companies.”

Fu also pointed out that Russia and Ukraine were major exporting countries of fuels and raw materials such as grains, petroleum gas and natural gas, adding: “Since war broke out between these two countries, the prices of such products have risen sharply. Moreover, nofly policies around the war zone have greatly affected air travel costs and time. Meanwhile, the continued escalation of the Middle East situation is further impacting global shipping and raw material supplies and directly affecting the operation of global supply chains.”

Amid heightened geopolitical risks, more trade restrictions and barriers appear around the world. International Monetary Fund (IMF) data cited by Fu show that the geopolitical risk index has spiked from an average of 93.8 between 2013 and 2021 to 141.2 between 2022 and 2024.

Asking what geopolitics tells us, Fu commented: “First, as far as regional economics is concerned, countries are consolidating regional economic development with trade measures and preferential treatment through different economic frameworks such as the Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Indo-Pacific Economic Framework (IPEF).

Meanwhile, supply chains have restructured. Mainland China was previously the world's factory and the largest exporting country but now many companies have relocated their factories to Southeast Asia and Mexico in response to the SinoUS trade frictions. Furthermore, while the US dollar is still the major currency for international trade settlement, many countries such as Brazil and Argentina have turned to renminbi for such purposes in recent years, reflecting the strengthening role of the Chinese currency in international trade markets.