should assess supply
chains and check
their trade disruption
insurance in this
global environment of
By Mercedes Ott
Writer, historian and philosopher Voltaire once quipped, “Uncertainty is an uncomfortable position. But certainty is an absurd one.” Though Voltaire lived and wrote during the Enlightenment period, he very well could have been reflecting on today’s international political risk climate. Uncertainty, it seems, can
be added to the very small list of life’s “sure things” — right next to death and taxes.
For multinational businesses, today’s uncertainty is, in part, a result of the
growing trend toward trade protectionism both in the United States and abroad.
Trade protection is the drive to limit imports or promote exports by creating
barriers to trade (such as tariffs) with foreign nations. The Trump administration
and nationalist government actors abroad have increased the focus on trade
“We live in interesting times,” said Richard Abizaid, XL Catlin’s head of the
Americas for political risk, credit and bond.
“Contrast this era to the post-World War II era where the liberal world order
was the dominant political and economic system with the United States at its head.
It created an atmosphere of predictability and allowed businesses to operate globally
based on the assumption that the rules of the game were known to all,” he said.
Today, economic protectionism is creating a climate of increased instability,
which is a shift from the years of predictability, said Abizaid.
The Trump administration’s unraveling of the Trans-Pacific Partnership, its
efforts to renegotiate the North American Free Trade Agreement and the push to
renegotiate the free trade agreement between the U.S. and South Korea are a few
examples of how trade protectionism is playing out on the world stage.
Experts predict this is only the first act.
President Donald Trump campaigned for the presidency on this issue, among
other things, and appears to be committed to following through on this promise.
But whether the current course is a long-term shift toward nationalism or simply
a Trump strategy used to create a better negotiating climate for the U.S. remains
to be seen.
Either way, with a president characterized as impulsive, sometimes hostile and
often lacking prudence, even a well-planned strategy could go awry, thus adding to
the uncertainty and risk.
“The President seems to be throwing some of this out there to get the
attention of other nations, so he can start renegotiating some of the deals he sees
as unfavorable to the U.S.,” said a brokerage executive who specializes in global
“He has made some exceptions, such as those for Canada and South Korea,
so maybe he’ll make an exception for some of the other countries or industries as
well. Trade wars are a concern on business leaders’ minds, and no one wants to see
this escalate and get out of control,” he added.
At Risk & Insurance® print time, the Trump administration, on May 1, delayed
for 30 days the imposition of tariffs on steel and aluminum for Mexico, Canada
and the European Union. The move was met with both anger from allies who
want more than a short-term fix and a collective sigh of relief from those who
feared tariffs would spark retaliation. But relief is temporary, because this issue is
far from resolved. Financial and other
business consequences could yet be
costly to industry and consumers alike.
SUPPLY CHAIN TARIFF RISKS
“There are different scenarios
that could take place that would be
detrimental to business,” said the
executive. Among them are tariffs (paid
on a class of imports or exports).
“Tariffs add cost to the supply chain.
This could impact costs by raising the
• Political protectionism is growing
• Protectionism results in growing
trade and supply chain risk.
• Careful strategy and insurance
products can help mitigate political
“Companies with investments
in China could be targeted
for retaliation by the Chinese
— Richard Abizaid, head of the Americas for
political risk, credit and bond, XL Catlin
The steel industry is a hot point, as the administrations in China and the U.S. square off over tariffs.