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The global banking system has faced mounting disruptions in recent years, from the 2008 financial crisis to the COVID-19 pandemic. Now, another force is threatening to reshape the financial landscape: the rise of reciprocal tariffs and protectionist trade policies. The idea of reciprocal tariffs appears straightforward: if a country imposes tariffs on U.S. goods, the United States will respond in kind. While framed to correct trade imbalances and protect domestic industries, its effects extend far beyond manufacturers, exporters, and importers. It also threatens to reshape global banking, distort financial flows, and force banks to rethink risk models to maintain prudential resilience.

Trade finance, valued by some at $9.7 trillion in 2024, represents a critical yet often invisible infrastructure that funds over 80% of global trade transactions. (Estimates vary based on different definitions and methodologies used.) Traditionally, this was considered a low-risk sector with default rates below 0.5%. Banks play a pivotal role in this ecosystem. They underwrite transactions through instruments like letters of credit, supply chain financing, and export credit guarantees. Banks and financial institutions must now reckon with a new, uncertain trade finance landscape.

As trade policies become increasingly protectionist, banks confront three new realities in which global trade finance faces heightened risks. One of the primary concerns is the potential for tariffs to disrupt supply chains, compelling banks to reassess corporate creditworthiness and trade finance exposure. A second challenge is the macroeconomic impact of tariffs, which tend to raise consumer prices without necessarily boosting economic activity. Finally, while some see opportunities in this shifting environment, there is a growing recognition that trade finance must adapt to an era of economic fragmentation. The need for diversification, alternative payment mechanisms, and resilient financing structures is becoming more urgent. These three developments point to a future in which banks that finance global trade must recalibrate their risk models and trade finance strategies.

History suggests that when global trade undergoes structural shifts, trade finance adapts. Two significant transformations in trade finance have occurred in the past century, both driven by seismic shifts in international trade patterns. The post-World War II era saw the emergence of structured global trade finance. Institutions like Export Credit Agencies helped finance trade for postwar economies. This era saw the formalization of letters of credit, providing a standardized framework for banks. The globalization and digitization era introduced SWIFT messaging for trade transactions, Basel-driven prudential norms, and digitized trade finance platforms. Banks began integrating trade finance into capital markets, leading to innovations like trade receivables securitization and blockchain-based settlement systems. With reciprocal tariffs, supply chain realignments, and the emergence of alternative trade finance models, we could enter a third major transformation in trade finance — one not driven by financial innovation but by geopolitical realignments and statecraft.

There is also a risk of unintentional consequences. Though designed to shield U.S. industries, reciprocal tariffs may adversely affect American banks. For example, during the 2018–2019 U.S.-China trade war, China slashed U.S. soybean imports by 75%, triggering loan defaults and bankruptcies among American farmers. Regional banks, particularly in the Midwest, saw increased non-performing loans tied to agricultural lending. Another looming concern is inflationary pressure and interest rate hikes. Tariffs increase the cost of imports, leading to inflation and potential Federal Reserve rate hikes. Higher interest rates could raise business borrowing costs, increasing default risks across multiple industries, including manufacturing, real estate, and retail.

This could have regional and global implications. As traditional trade regimes get disrupted, new trade finance centers may emerge. Financial hubs like Hong Kong and Singapore must adapt to intra-Asian trade, just as European banks, including Deutsche Bank and HSBC, are shifting toward intra-European and emerging-market trade finance. At the same time, alternative trade finance systems are growing. China, Russia, India, and the UAE are increasing local currency trade settlements, bypassing the U.S. dollar. If this trend accelerates, it could erode the dominance of U.S. banks in global trade finance.

There is little doubt that reciprocal tariffs, once seen as a temporary trade correction tool, will reshape global banking and trade finance if implemented. Large banks traditionally involved in international trade might have business and strategic ingenuity, apart from having a closer axis to governments and policymakers. The middle segment of the banking industry might be unable to adapt to this shifting landscape and risk collateral damage in the broader battle over trade and financial dominance.

The world must act swiftly to mitigate risks to the existing trade finance order, strengthen trade finance mechanisms, and ensure financial stability — or face a future in which trade finance becomes another battleground in the geopolitical struggle for economic influence.

Udaibir Das is a Distinguished Fellow at ORF America, a visiting professor at the National Council of Applied Economic Research, a senior non-resident adviser at the Bank of England, a senior adviser of the International Forum for Sovereign Wealth Funds, a distinguished visiting faculty at Kautilya School of Public Policy, and a Senior Advisor and Program Leader at the Toronto Center. He was previously at the Bank for International Settlements, the International Monetary Fund, the Reserve Bank of India, and the Bank of Guyana.

Boosting female labour force participation is not just a matter of gender equality but is also an economic imperative.

India’s quest for high economic growth and social equity hinges on an obvious but underrated lever — its women’s workforce. Despite significant progress in education and health care, the country lags in enabling women’s economic participation. A staggering 60% of India’s women of working-age remain outside the labour force, depriving the economy of their contributions. A new study by the writers, titled “Unlocking Women’s Workforce Potential in India: Quantifying the Labour Market Impact of Formalising Part-time Employment and Gender Equality in Unpaid Care Work”, published by the National Council of Applied Economic Research (NCAER), delves into two key barriers to women’s labour force participation: the unequal burden of unpaid care work and the lack of formal part-time employment opportunities. The findings provide actionable insights for policymakers to unlock India’s untapped workforce potential.

India’s female labour force participation rate (LFPR) stands at 37%, well below the global average of 47% and the Organisation for Economic Co-operation and Development (OECD) average of 67%. The reasons are multifaceted, stemming from multifaceted barriers faced by women. A key barrier relates to unpaid domestic responsibilities that women carry disproportionately, such as child-rearing, elder care, and household chores. According to the Time Use in India Report 2019, Indian women devote more than twice as much time to unpaid care work as compared to men, leaving them with limited opportunities for paid employment.

A second barrier that women in particular face is the absence of formal part-time work options. Unlike in advanced economies, where part-time employment is legislated, well-regulated and socially accepted, Indian does not have formal provisions for part-time work. Women who seek flexibility to balance professional and domestic duties often end up in informal, precarious jobs, with no job security or social benefits. This dual burden of paid and unpaid work not only limits a woman’s career prospects but also affects her ability to contribute to India’s economy.

Study and its findings

The writers conducted a study to quantify the increase in female labour force participation rates (LFPR) when these two barriers are addressed. They used the McCall-Mortensen job search model to simulate the impact of formalising part-time employment and redistributing unpaid care work between men and women. They found that addressing just two barriers faced by women could raise the female LFPR by six percentage points, from 37% to 43%.

The study identifies two key interventions. First, formalising part-time employment: introducing formally recognised part-time work contracts with pro-rated wages and benefits would offer women the flexibility they need. Globally, 57% of women in part-time jobs cite flexibility as a key factor. In India, however, the lack of formal recognition for part-time work means that women often face exploitation and uncertain employment prospects. Second, redistributing unpaid care work: gender equality in caregiving responsibilities is crucial in enabling women to participate in the labour force. This requires both policy measures, such as paid parental leave and public investment in childcare infrastructure, and cultural changes that abandon traditional gender roles.

The study highlights best practices from advanced economies that India could adapt. For instance, Scandinavian countries have robust policies for part-time work, parental leave, and subsidised childcare, which have significantly boosted female workforce participation. In France, part-time workers receive the same protections and benefits as full-time employees, ensuring equitable treatment. The European Union’s directives on part-time work, adopted in the late 1990s, mandate equal pay and social security for part-time workers. India’s labour laws, by contrast, remain silent on these issues, perpetuating systemic inequalities

Policy recommendations

The paper’s findings underscore the need for a multi-pronged policy approach. First, formalising part-time work: India must define and formalise part-time employment. This includes setting hourly minimum wages (the smallest unit for defining minimum wages in India is per day and not per hour), ensuring job security, and providing access to social security benefits. Formalising part-time work would create a structured pathway for women to enter the workforce while balancing caregiving responsibilities.

Second, investing in care infrastructure. Public and private investment in affordable childcare and eldercare facilities yield many benefits to private companies and the macroeconomy, as international studies have shown (Council of Economic Advisors, U.S) .Such measures would not only reduce the caregiving burden on women but also create new employment opportunities in the care economy.

Third, promoting gender equality in caregiving. Policies such as paid parental leave for both parents and tax incentives for shared caregiving responsibilities can help redistribute unpaid care work. Awareness campaigns to challenge societal norms and promote gender equity are equally important.

Fourth, flexible work policies. Employers should adopt flexible work arrangements, such as remote work and adjustable schedules, to support employees with caregiving responsibilities. This move would also be in the self-interest of companies because their output and productivity can be expected to increase.

Boosting female labour force participation is not just a matter of gender equality, but is also an economic imperative. Research by the International Monetary Fund estimates that closing the gender gap in labour force participation could increase India’s GDP by 27%. Higher female LFPR would lead to greater household incomes, improved standards of living, and enhanced economic productivity.

The ripple effects extend beyond the economy. When women participate in the workforce, it shifts societal perceptions of gender roles, inspiring younger generations and fostering a culture of equality. Moreover, women’s financial independence contributes to better health and education outcomes for their families, creating a virtuous cycle of development.

Challenges to implementation

While the benefits of these interventions are clear, their implementation poses significant challenges. Deeply ingrained cultural norms often resist change, making it difficult to redistribute caregiving responsibilities. Employers may be reluctant to adopt flexible work policies without government regulation. Additionally, the informal nature of India’s labour market, where over 80% of workers are employed, complicates the formalisation of part-time work.

Addressing these challenges requires coordinated efforts from policymakers, employers, and civil society. The government must take the lead by formalising labour reforms and investing in care infrastructure, as is common in many advanced economies. Employers should recognise the business case for diversity and flexibility, which have been shown to improve employee retention and productivity. Civil society organisations should continue to play a crucial role in raising awareness and advocating for gender equality.

As the country aspires to become a developed nation by 2047, harnessing the potential of its women’s workforce is essential. By formalising part-time employment, redistributing unpaid care work, and promoting gender equality in its society, India can unlock a brighter, more inclusive path for its society today and for future generations. The time to act is now.

Aakash Dev is an Associate Fellow in the Center on Gender and the Macroeconomy (CGM) at the National Council of Applied Economic Research (NCAER), India. Ratna Sahay is a Professor at the National Council of Applied Economic Research (NCAER), India and a Non-Resident Fellow at the Center for Growth and Development, Washington DC. Views are personal.

Perhaps US efforts to cut off China’s access to advanced semiconductors will be more successful than analogous restrictions on tech exports to France in the 1960s. But we now have at least one data point – DeepSeek – that suggests otherwise.

BERKELEY – Starting in October 2022, the late, lamented (by some) administration of President Joe Biden implemented restrictions on US exports of advanced semiconductors to China. A classic “dual use” technology, these chips power generative AI and supercomputers used in weapons systems, cyberattacks, and surveillance. Equally, they can enhance the ability of companies to compete internationally – in this case the ability of China’s high-tech firms to compete with their American rivals.

In its final months, the Biden administration doubled down on these restrictions, adding high-bandwidth memory chips and chipmaking tools to the list of prohibited items. Donald Trump’s administration, dominated by China hawks, is poised to ramp up these measures still further.

China has retaliated with export controls on rare earths and related materials used by American producers. But the more serious threat is that China will accelerate the development of its own capacity to design chips and build chipmaking equipment. If China closes the technology gap faster than it otherwise would have, then US export controls will have proven ineffectual or even counterproductive.

It’s hard to predict the success or failure of China’s efforts. But it may be informative to look to the past, where some of the most relevant history comes from, of all places, France in the 1960s.

French politicians and businessmen at the time perceived an economic threat from the United States. This was the era when the journalist and politician Jean-Jacques Servan-Schreiber warned that France could become an economic vassal of the US. Servan-Schreiber was worried about the invasion of Europe by US multinationals, with General Electric’s 1964 acquisition of the French computer company Machines Bull a prime example.

In addition, French President Charles de Gaulle objected to US dominance of NATO and refused to put France’s forces under joint command with other alliance members. Ultimately, he withdrew France from NATO’s integrated command.

This was the context of America’s decision in 1964 to deny licenses for the export of advanced IBM and Control Data Corporation (CDC) computers to the French Atomic Energy Commission. These giant mainframe computers could have been used for calculations enabling France to build a hydrogen bomb, which only the US and the Soviet Union possessed at the time. A thermonuclear capacity would have allowed France to pursue an independent defense policy in disregard of US wishes. Reverse engineering IBM and CDC machines also might have helped reinvigorate France’s commercial computer industry and overcome the sad dismantling of Bull.

Such was the background of the delightfully named Plan Calcul launched by the French government in 1966. The government envisaged investing more than one billion francs – about €1.5 billion today – in the French computer industry in the program’s first five years. Half would be provided by the state in the form of research subsidies for private firms, and half by the firms themselves.

To help the companies finance their share, the state extended subsidized loans and guarantees. An agency attached to the prime minister’s office coordinated the plan, which entailed merging two French companies to create a national champion, Compagnie internationale pour l’informatique (CII).

Plan Calcul was championed by de Gaulle himself, who saw a world-class military and a world-class economy as equally important for securing France’s status as a global power – for restoring its “grandeur.” One cannot but be reminded of the aspirations of Chinese President Xi Jinping and his personal role in efforts to advance China’s high-tech supremacy.

Ultimately, Plan Calcul failed to make France a leader in high-speed computers. The government’s technocrats, instead of working harmoniously with the private sector, micromanaged CII’s affairs, keeping for themselves the roles of bankers, entrepreneurs, supervisors, and clients. They focused not on commercial markets, where CII would have felt the chill winds of competition, including from IBM, but on government procurement contracts, where CII could stay fat and lazy. Rather than supporting the private sector, the government’s interventions impeded its progress.

Moreover, when forming their national champion, the technocrats excluded Bull, the firm with the most expertise, since it was now in foreign hands. Rather than complementing one another, national security and economic imperatives worked at odds with each other.

But if Plan Calcul was a damp squib, this was not because the US export-control regime was effective. Firms like IBM pushed back against the loss of business and were able to obtain exemptions. Information flowed freely between IBM’s plants in the US and France, where, as the CIA observed, it could be accessed by local scientists. When the latest computers were unavailable, the French were able to substitute them with slightly older versions.

Thus, France acquired the hydrogen bomb in August 1968, successfully testing a device in French Polynesia. In the end, US export controls only briefly delayed the geostrategically inevitable. Perhaps America’s latest resort to export controls will be more effective. But we now have at least one data point – DeepSeek – that suggests otherwise.

Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley, is a former senior policy adviser at the International Monetary Fund. He is the author of many books, including In Defense of Public Debt (Oxford University Press, 2021).