As the US and China agree to a significant but temporary reduction in tariffs, trade credit insurers continue to have volatility at the top of their minds.
A 90-day window where “reciprocal” tariffs are cut significantly between both countries opened Wednesday (May 14), reducing US tariffs on Chinese goods from 145% to 30% and China’s tariffs on US goods from 125% to 10%.
The reprieve has eased some pressure among exporters in both countries, with Chinese freight forwarders expecting a flood of orders and planning calls with their US counterparts, reports Bloomberg.
Trump’s announcement on Monday comes as the US announced a partial pause on tariffs the US set on the world on April 2, or “Liberation Day”, as nations scrambled to negotiate with the world’s largest importer of goods.
Hoang Anh Le Nguyen
APAC Lead for Trade Finance and Working Capital at Swiss Re Corporate SolutionsCredit insurance demand likely to grow
This has led to some trade flows experiencing increased volumes as firms take advantage of the current reprieve, Hoang Anh Le Nguyen, APAC Geographic Lead for Trade Finance and Working Capital at Swiss Re Corporate Solutions, tells (Re)in Asia. “Others may see delayed investments as involved parties adopt a wait-and-see approach. The situation remains very volatile and could change in any direction,” she says.
Most notably, uncertainty reigns over whether the pause will last — and whether a new trade agreement between the world’s two largest economies will be minted after 90 days.
“The pause did not even mark a return to pre-reciprocal tariff status quo,” says global credit insurer Coface’s Asia Pacific Chief Economist Bernard Aw. “A baseline 10% still applies, and when combined with those announced before 2 April, the current tariff rate on most Chinese goods imported into the US is around 50%.”
Firms are still grappling with complications around the 90-day pause. “There is no clarity if a concrete trade deal can be concluded before the 90-day period expires, or whether it will be extended to allow for more time,” Aw adds. “What is clear is that trade patterns are now in a period of great uncertainty and higher costs.”
Bernard Aw
APAC Chief Economist at CofaceEric den Boogert, Managing Director of credit (re)insurer Atradius Asia, expects the US-China tariff pause to have positive effects on global GDP growth and inflation. “This de-escalation will ease pressure on global supply chains,” he says. “Financial market conditions are expected to ease in response to the de-escalation, which should further support growth.”
But given that tariffs are now being used as a negotiating tactic by the US, the potential for future escalations remain, den Boogert adds. “This will keep trade policy uncertainty uncomfortably high and continue to pose a risk of major disruptions in global supply chains.”
And with this uncertainty in tariffs come renewed interest in trade credit insurance, policies that protect exporters against non-payment risks when tariffs and other economic pressures cause buyers to default.
“An increased interest in credit insurance can be expected among companies that anticipate that US tariffs may affect their clients’ cash flows,” says den Boogert. But it is still “premature” to determine if current volatility will impact trade credit insurance premiums, he says.
“Changes in risk deterioration [that tariffs and economic uncertainty bring] will be gradual in their intensity, deferred in time and with significant variations from business to business,” den Boogert adds. “Our premiums will always reflect the evolution of the trade credit risk of our clients’ customers, case by case.”
Eric den Boogert
Managing Director at Atradius AsiaSmall and vulnerable businesses down the risk curve may face increased challenges in times of heightened volatility, says Nguyen, while stronger risks are expected to remain resilient.
“We anticipate rate adjustments will mirror the evolving creditworthiness of the respective obligors [buyers or debtors] and transactions as they respond to shifts in the business landscape,” says Nguyen. “There may be a growing preference for short-term trade transactions over long-term deals.”
Coface Chief Underwriting Officer Raphael Rousselot tells (Re)in Asia the firm did not anticipate significant changes in rates, premiums or terms for trade credit insurance due to the ongoing volatility.
“The premium rate for trade credit insurance is determined by various factors, including the industry, countries covered and the financial condition of the buyer portfolio,” says Rousselot. Two firms in the same industry may receive different trade credit premiums depending on their buyer mix and risk profiles, he adds.
Coface has, however, seen increased demand for credit and risk management services and products, with the number of enquiries for the first quarter of 2025 up 45% compared to Q1 2024, Rousselot says. “The global economic slowdown, rising interest expenses and declining margins have led to an increase in business insolvencies and payment defaults worldwide, particularly in the Asia-Pacific region.”
Volker Kudszus
Sector Lead, Insurance Ratings at S&P GlobalEven as tariffs drive up prices for goods, demand for trade credit insurance may only rise if defaults increase, says Volker Kudszus, Managing Director – Sector Lead Insurance Ratings at S&P Global. “Generally, the awareness of trade credit products may increase amid this volatility. This may have a slight positive impact on trade credit insurers’ top line,” he notes.
Escalating trade tensions and rising geopolitical risks have also contributed to unprecedented levels of uncertainty, says Rousselot. “Corporations are becoming increasingly aware of the evolving and complex trade environment, driving the demand for robust risk management solutions.”
Coface expects claims frequency to rise in the short term. “The number of claims has been increasing since last year,” Rousselot says. “Our loss ratio in the Asia-Pacific region increased by about 20% in 2024. However, the level of claims is still lower than the average level before COVID, which is still manageable.”
Raphael Rousselot
Chief Underwriting Officer at CofaceWhere do the opportunities lie?
Den Boogert says that while the credit (re)insurer has yet to see a significant increase in demand from the tariff situation, the firm is amply sized to meet it. And as trade flows and value chains shift, credit insurance will remain the backbone, guaranteeing commercial credit lines between companies.
“Companies seeking to protect themselves against possible financial losses will turn to credit insurance to facilitate the continuity of their business operations,” says den Boogert. “In this scenario of reconfiguration of world trade and changes in value chains, credit insurance will be key to accompanying companies in their own strategies of prospecting new markets and monitoring the credit risks in their customer portfolios.”
And that brings insurers an opportunity to strengthen relationships with clients as they maintain close proximity, says Rousselot. “Insurers can offer more personalised and effective solutions, thereby enhancing customer satisfaction and loyalty.”
The increase in demand for risk management services presents an opportunity for insurers to expand their offerings and innovate to meet the evolving needs of the market, Rousselot adds, and carriers should take advantage of their expertise in managing volatility.
“They should establish a presence of local risk experts across the globe to provide timely and relevant insights, and utilise extensive data to make informed decisions in real-time,” says Rousselot.
Hoang Anh Le Nguyen
APAC Lead for Trade Finance and Working Capital at Swiss ReIn this volatile time, financial institutions may manage their aggregations more prudently, while development banks shift to support new trade patterns as the global environment changes, says Nguyen, bringing opportunities for trade credit insurers.
“Opportunities may arise on various fronts, including where financial institutions may seek to manage aggregations on the best risks, and where multilateral development banks can support shifts in supply chains and trade diversification,” explains Nguyen.
In particular, Swiss Re sees opportunities to leverage joint intelligence in monitoring and managing risks. “It’s often in turbulent times that partnerships are strengthened,” Nguyen says.
