Global superpower consolidation and responses to global threats will have ripple effects that must be observed and quantified in 2025. In response, regimes are stockpiling materials at a rapid pace. International policymakers are worried about new geopolitical threats, not least that political regimes may seek to gain leverage by choking crucial supply routes.
Marine underwriters and insurance companies in other specialty classes have been telling us over the last two or three years that they need to be better equipped to understand how geopolitics could directly and indirectly impact their portfolio. The marine class and the insurance industry are now on board with the idea of using a scenario-led approach to help them to make more informed decisions about the threats they face.
These threats can include economic policies, trade disputes, tariffs, sanctions and other factors that could impact global trade dynamics. So how might geopolitical tensions cause chokepoints across the global economic value chain?
Countries falling in competing superpowers’ sphere of influence could be forced to reduce their trade with one party or divert their resources to other countries. Supply route chokepoints such as the Panama and Suez canals will provoke further political and possibly military confrontations.
Tariffs are a major concern for economies such as Canada’s which is more exposed than others as the US imports US$6.1 billion of iron and steel from its North American neighbour according to Russell Group’s Trade Threat Observatory.
In a horizon scan of factors that could impact global trade dynamics, the Observatory’s analysis of 25 percent tariffs on foreign steel and aluminium imports, reveals that Brazil (US$4.40 billion) and Mexico (US$2,68 billion) came in second and third place respectively.
Trade tensions could hit the soybean trade. Clothing, computers and office equipment and other goods will be caught in the cross hairs of worsening international relations. In this environment, it will become more important for marine (re)insurers to have good data-led insights, to understand the impact of these threats on their portfolios.
The first issue of Russell’s Trade Threat Observatory is available to download here.
