Trade Challenges Will Not Undermine Global Economic Integration: QNB

Doha: Qatar National Bank (QNB) has stressed that trade challenges will not undermine global economic integration, and that market pressures, legal constraints, corporate adaptability, and the continued commitment of other major economies to openness all suggest that globalization is not being reversed, but rather geographically reshaped and re-oriented.

In its weekly economic commentary, QNB said that while the scale of the recent US tariff measures is unprecedented, even after several rounds of exemptions, the forces underpinning global economic integration remain robust.

"For some analysts and investors, the magnitude and abrasiveness of the US tariff hike meant not only a pause on trade liberalization, but also potentially the first systematic tentative to reverse it. In our view, however, despite the extraordinary challenges posed by much higher US tariff rates, there are reasons to be optimistic and believe that global economic integration will be resilient towards existing deglobalization threats," the report said.

QNB based its analysis on three main factors. First, the objectives and mandate of the new US tariff packages remain unclear, raising the likelihood of resistance from key market and institutional stakeholders.

The bank said that the underlying targets of the new tariffs remain ambiguous, while raising this question: Is the goal to reduce the trade deficit, revive domestic manufacturing, isolate strategic rivals, or simply boost federal revenues

"For instance, broad-based tariffs that raise input costs can harm US manufacturers and consumers, undercutting the reshoring narrative used to justify them," it said.

It pointed out that targeting allies risks diplomatic backlash and complicates coordination on issues such as isolating strategic competitors or access to critical raw materials.

Markets reacted sharply to the US tariff announcement, with US Treasury yields rising on fears of de-anchored inflation expectations and lower policy credibility.

Second, tariffs are relatively blunt instruments in a world defined by complex supply chains, digital trade, and fluid capital mobility.

Unlike in the mid-20th century, when trade flows were largely bilateral and goods were produced end-to-end in one country, today's production networks are deeply fragmented and global.

A single product might cross multiple borders during assembly, diluting the intended economic effect of country-specific tariffs. Multinational firms are adept at adapting quickly, reconfiguring sourcing, rerouting shipments, or absorbing costs through internal pricing strategies.

The result is that tariffs often fail to meaningfully shift production back to the imposing country, while still potentially raising costs for domestic consumers and firms.

Third, the US may be raising barriers, but the rest of the world is largely moving in the opposite direction. From the European Union (EU) to Asia and Latin America, most major economies continue to view open trade as essential to their growth models - and are actively pursuing deeper integration.

Recent examples include the Regional Comprehensive Economic Partnership (RCEP) in Asia, the EU's expanding trade agreements with key South American (Mercosur) and Indo-Pacific partners, and the African Continental Free Trade Area.

Non-US activity spans 73% of global GDP and 87% of trade flows, reinforcing a multipolar trading system that can remain dynamic even without US leadership.

The US retreat may even accelerate cooperation among others, as countries seek to hedge against protectionist shocks and preserve market access. As a result, global firms may increasingly orient towards alternative hubs with more stable trade frameworks, limiting the gravitational pull of US tariffs.

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