Even as many countries continue to rely on U.S. military protection and the technological dominance of Silicon Valley firms, governments and businesses are finding that the global trade in goods offers more room for maneuver than might have been assumed. In recent weeks a string of bilateral agreements has accelerated a re-drawing of trade connections, not with the aim of decoupling from the United States, but to "de-risk" economic exposure to U.S. policy shifts.
The term "de-risking" has until recently been used mainly in reference to China, but it is increasingly applied to strategies that limit the impact of U.S. trade volatility. Such hedging comes with costs - companies must reconfigure supply chains or accept uncomfortable partnerships with trading partners whose political values differ - but early signs suggest the economic pain is manageable.
"Trade is probably one of the areas where middle powers have some of the greatest agency in choices," said Alexander George, senior director for geopolitics at the Tony Blair Institute for Global Change (TBI). He cited the European Union as an example, noting that recent trade threats have focused policy-makers and helped push through deals that had long been delayed, including the signing this month of the EU-Mercosur trade pact with Latin American partners and, more recently, a deal with India sealed this week.
Businesses move ahead while politics catches up
Free trade agreements remain complicated legal and political undertakings, and whether the EU can fully ratify the Mercosur pact in a timely manner remains an open question. Similarly, efforts to mend ties with China, following lengthy deterioration, still require time to translate warm words and preliminary agreements into sustained cooperation.
Nonetheless, firms are already taking steps to exploit new openings. The Irish Whiskey Association described the EU-India deal as "critical" in helping it find alternative customers to offset the impact of the 15% tariff it faces in its largest market, the United States. German investment in China also rose, with the IW German Economic Institute reporting a four-year high last year as companies pushed to strengthen local supply chains in response to a more hostile U.S. trade environment.
Economic forecasts have not, so far, reflected severe disruption. Reuters' quarterly poll of 220 economists released this week highlighted a central finding: global economic growth this year is still expected at 3%, unchanged from forecasts a year ago despite shifts in supply chains prompted by U.S. trade actions.
Some observers argue that reworking decades of globalization centred on a few large trading blocs could yield long-term benefits. Quoting the idea that middle powers can form webs of mutual alliances, proponents say diversification across partners can spread production and investment more evenly.
WTO Director-General Ngozi Okonjo-Iweala commented on these dynamics at the World Economic Forum in Davos, saying: "You kill two birds with one stone. You create jobs elsewhere by investing, you build global resilience because you don’t cluster too much production in one place." She noted these emerging deals are generally structured according to WTO principles of free and fair trade.
Diversification preferred over confrontation
For many countries, diversifying trade routes and partners appears a safer option than taking an adversarial stance toward Washington. Research from the UK’s Aston University modelled a scenario tied to tensions over Greenland and found that the threatened 25% U.S. tariff would have cut European economies' income per capita by just 0.26% if they refrained from retaliating. That outcome compares with a loss more than twice as large if Europe imposed a reciprocal 25% levy on U.S. goods, according to the modelling.
Mujtaba Rahman, managing director for Europe at the Eurasia Group consultancy, suggested that trade diversification is proceeding in Europe even as deeper structural reforms, such as integrating fragmented national capital markets, remain unresolved. "Diversification on the trade side is absolutely happening and continuing," he said. "Is Europe a more credible economic proposition in five years’ time? That’s not clear to me."
Limits to how far trade can be re-routed
Two constraints may slow the pace and breadth of adaptation. First, Chinese authorities have not opted to stimulate domestic consumer demand strongly enough to replace lost U.S. demand. The Tony Blair Institute highlighted that while China's exports have risen following higher U.S. tariffs, its imports have not, leaving other countries - including many in Asia and Africa - to run growing trade deficits with China.
Second, the United States could react negatively to diversification efforts and use its influence to discourage partners from moving out of its economic orbit. "The question is to what extent this becomes a geopolitical faultline," said TBI’s George, noting the potential for trade realignment to create new divisions.
Where this matters most
The adjustments under way touch manufacturing and export-oriented sectors most directly, as companies relocate production or seek new markets. Financial market implications include currency flows and investment allocation as firms chase stability and predictable trade terms. Consumer-facing industries, such as spirits exporters cited by the Irish Whiskey Association, are already recalibrating sales strategies to offset punitive tariffs in large markets.
Overall, the emerging pattern is not wholesale decoupling from the United States but a pragmatic broadening of trade ties - an insurance strategy that spreads risk across partners while accepting trade-offs in speed, cost and political alignment.