The new playbook: how pragmatism is reshaping global trade

Just over a year ago, the global trading system seemed broadly stable. Today, the efficient free-trade framework built over seven decades has been fundamentally reshaped. Longstanding relationships have weakened or evolved, giving way to a more transactional world where national interest and pragmatism outweigh ideology.

Geopolitical tensions had already exposed the vulnerabilities of a rules-based order built on trust and interdependence, slowing the advance of globalisation. Donald Trump’s return to the White House accelerated the shift. The US has rewritten the rules through tariffs, geopolitical confrontation and combative rhetoric towards allies and rivals alike. In response, countries have reassessed their partnerships and priorities, furthering the global realignment.

The return of tariffs

After decades of falling trade barriers, tariffs have re-emerged as a central tool of US economic policy. Measures introduced during President Trump's first term and maintained under President Biden were expanded sharply in 2025, pushing average US tariff rates to their highest in decades. While they have since eased from their peak (see Figure 1), rates remain significantly above pre-2025 levels and differ markedly across trading partners.

Read also: Investing for a new reality: how geopolitical change is reshaping capital flows

FIG 1. US tariffs remain structurally higher¹

How have trading relationships changed?

The Trump administration's approach has accelerated changes in established trading relationships and multilateral frameworks.

Some key examples:

• Country of origin matters more. The US-Vietnam agreement introduced a 40% tariff on goods transshipped through Vietnam, versus 20% for Vietnamese-made products. The aim is to deter the rerouting of Chinese exports through intermediary countries
   
• Trade linked to investment and industrial policy. In its 2025 deal with the US, Japan agreed to a 15% US tariff and pledged USD 550 billion of investment in strategic US industries, while also agreeing to increase purchases of US goods and improve access for American exporters
   
• Supply chains as strategic leverage. In Trump's second term, geopolitical tensions with China escalated through successive rounds of tariffs followed by periods of negotiation and truces. The dispute extended beyond tariffs: China leveraged its dominance in rare earths, imposing export controls on critical minerals and materials used in industries ranging from electric vehicles (EVs) to defence
   
• More pragmatic trade deals. US trade tensions acted as a catalyst for new partnerships elsewhere. The UK and India broke years of deadlock to secure a free trade agreement focused on services, while the EU and Indonesia moved past disputes over palm oil and sustainability to strengthen ties around trade and strategic minerals.
   

Mid-sized economies move to adapt

As geopolitical relationships become less predictable, governments and businesses are prioritising resilience – strengthening supply chains through nearshoring, friendshoring, reshoring and duplicate capacity, even if that pushes up costs.

Canada and Switzerland offer contrasting examples of how economies caught between the two superpowers are responding.

Case study 1: Canada

As Figure 2 shows, Canada has historically been highly dependent on a small number of export markets, particularly through the late 1990s and early 2000s. The Herfindahl index is a commonly used measure of how concentrated a country's exports are among its trading partners. Higher levels of concentration can leave nations more exposed to economic or geopolitical disruption.

FIG 2. Canada has historically been highly vulnerable to a subset of partners²

In Prime Minister Mark Carney's view, a more fragmented world requires Canada to pursue a pragmatic and diversified foreign policy. While maintaining close ties with the US, Canada is strengthening relationships with countries including India and, cautiously, China, and increasingly relying on flexible coalitions built around shared interests rather than fixed alliances³.

Continuing trade disputes between the US and Canada in 2026 have highlighted the importance of diversification, resilience and strategic flexibility in an increasingly fragmented trading system.

In Carney’s view, a more fragmented world requires Canada to purse a pragmatic and diversified foreign policy

Figure 3 illustrates how Canada's export relationships have evolved. Prior to China's accession to the WTO in 2001, exports became increasingly concentrated on the US market. Following China's emergence as a global trading power, Canada's exports diversified somewhat. Since the first Trump-era tariffs, there has been continued, albeit more modest, diversification away from the US.

FIG 3. Canada has reduced its traditional reliance on US exports²

Case study 2: Switzerland

A relatively small country on the global stage, Switzerland has historically been highly effective at using its neutral status and open, innovative economy to trade with a range of export partners.

FIG 4. Switzerland has historically been well diversified in terms of export partners²

The Trump administration imposed additional tariffs of 39% on many Swiss exports to the US in August 2025. Switzerland later reached a non-binding framework agreement that reduced the rate to 15%, alongside plans for Swiss investment in the US.

Many Swiss companies have been able to navigate through the more complicated and uncertain international trade environment, in our view. A majority of the additional costs can be transferred to customers, and many Swiss firms produce goods close to where they are sold – including through manufacturing operations in the US and the EU.

Overall, Switzerland has increased exports to the US from 10% in 2018 to 23% of its total, mainly at the expense of Germany and China.

FIG 5. Switzerland has increased its exports to the US in the new higher tariff regime²

Canada and Switzerland are taking different steps to solve different problems. Having started with a high dependence on the US, Canada has moved to diversify. In contrast, Switzerland began from a more diversified export position; it has responded to recent global trade shifts by increasing its exposure to the US market. Ultimately, the best approach to ensure resilience depends not only on where a country ends up but also on where it started.

Ultimately, the best approach to ensure resilience depends not only on where a country ends up but also on where it started

How Asia aims to benefit from trade disruption

Asia offers a useful illustration of how countries are building new competitive advantages through a more regionalised approach. Even before the recent tariff war, the US increasingly used its control of strategic assets and technologies as a tool of geopolitical influence. In response, countries across Asia have accelerated efforts to strengthen domestic capabilities and build resilience to be less dependent on Western supply chains.

Figure 6. Asia responds pragmatically to US weaponisation of resources and technology⁴

China has taken a particularly pragmatic and long-term approach. Faced with concerns about access to critical energy and resources, it has prioritised electrification and invested heavily in strategic industries. The result: China now holds leading positions in solar panels, wind power, battery technology and rare-earth processing.

Asia offers a useful illustration of how countries are building new competitive advantages through a more regionalised approach

The automotive sector provides a striking example. Chinese companies spent years building expertise in battery technology, manufacturing scale and vertically integrated supply chains. What began as an effort to reduce dependence on foreign technology has evolved into a globally competitive EV ecosystem. Today, Chinese firms control large parts of the EV battery value chain, with technological and cost advantages over rivals.

Volkswagen⁵, once the dominant foreign automaker in China, has come under growing pressure from domestic EV manufacturers. The company's restructuring efforts and job cuts reflect a broader challenge facing Western companies, as China's advantages prove difficult to replicate quickly.

our expertise.

Swiss Equities

learn more

Asia High Conviction equities strategy

learn more

More broadly, efforts by countries to strengthen self-sufficiency and secure strategic industries are likely to drive demand for real assets, commodities, energy infrastructure and critical resources.

For investors, the key opportunity may lie in identifying the companies and sectors positioned to benefit from the ongoing reorganisation of the global economy.