International Trade 2026

Continuing Trade Tensions Create Increasing Challenges

The legal landscape for cross-border trade and investment has been dominated by US President Donald Trump’s tariff actions and the impact of US trade partners’ reactions thereto, as well as realignments among China, India and Russia with each other and in markets throughout sub-Saharan Africa, southeast Asia, and Central and South America. The EU, for its part, is aggressively pursuing unilateral regulation to level what it perceives as an imbalanced playing field caused by differences in the extent of national regulation in areas such as climate action, labour and human rights, public procurement access and subsidies – in the eyes of its trading partners, at the expense of international co-operation. The UK continues to develop its post-Brexit independent trade policy: achieving the first economic deal on tariffs with the Trump administration; launching its own trade remedies investigations tailored to UK interests; and maintaining a leadership role, with the US and EU, in economic security considerations including sanctions and export control policy, whether as staunch supporter of Ukraine, in relation to Iran’s nuclear programme, or nuanced application of end-user and investment controls on China. These trends are likely to continue through 2026.

Business leaders charged with developing strategies for the future will need to adapt to the following:

• increased sanctions, export controls and tariffs;
• more regionalised and complex supply chains, impacted by increasingly stringent due diligence and reporting requirements related to responsible sourcing (including in relation to – eg, forced labour, greenhouse gas emissions, critical raw materials, etc);
• increased trade remedy protections (including copycat and tit-for-tat measures); and
• enhanced scrutiny on (foreign) investments and trade, likely subject to complex foreign investment screenings and foreign subsidies investigations.

However, while risks abound, so do opportunities.

While the spike in US tariffs, and in tariff levels on US imports into China and elsewhere, creates near-term tensions, there are meaningful opportunities for supply chain gains in the long term.

The response to Russia’s further invasion of Ukraine in February 2022 has combined asset freezes, import and export restrictions extending to key services sectors (most notably banking – adding complexity even for permitted trade with Russia – but also stretching across a range of technical and professional services) and new investment and services bans. In taking action aimed at Russia, the EU, UK and US have moved aggressively and in relative concert.

In contrast, the US has imposed unilaterally significant export controls on China, covering supercomputing technology and semiconductor manufacturing, with initially the Netherlands and Japan, and then others, following suit. In turn, in October 2025, China announced further tightening of its export control regime, including with respect to rare earth minerals.

Applying its International Procurement Instrument for the first time, the EU banned bidders of People’s Republic of China (PRC) origin from participating in nearly all high-value EU public procurement procedures for medical devices and placed limitations on the use of PRC-origin subcontractors and medical devices by successful non-PRC bidders in the execution of such procurement contracts.

The UK’s end-use export controls have been extended to apply to a wider range of end-use scenarios in embargoed destinations, most notably China. Industry and the university sector are under pressure to increase their understanding of economic security concerns, particularly manufacturers and researchers operating in advanced quantum computing, aerospace and maritime/underwater technology programmes. Meanwhile, the UK is developing new trade enforcement tools, particularly around economic security regulation. These include enhanced whistle-blower protection, increased cross-border co-operation, the introduction of a new Foreign Influence Registration Scheme and new supervisory and enforcement powers for UK authorities such as the Office of Trade Sanctions Implementation and the Financial Conduct Authority.

There has also been a stronger focus in trade restrictions on human rights and sustainable sourcing, adding an additional layer of complexity to compliance. The EU’s Carbon Border Adjustment Mechanism (CBAM) is in a transitional phase with reporting obligations imposed on imports of certain products; from 1 January 2026, importers must purchase and surrender CBAM certificates corresponding to the emissions released during production of covered products.

The EU’s Deforestation Regulation (EUDR) prohibits placing on the EU market and export of seven commodities including cattle, cocoa, coffee, palm oil, rubber, soya and wood, as well as certain products that contain, have been fed with, or produced using these commodities, unless they are deforestation-free, produced in accordance with the laws of the country of production, and covered by a due diligence statement attesting compliance with the EUDR. The due diligence, traceability and related requirements of the EUDR were initially extended to end-2025 and are expected to be extended for a further year, giving companies a little more time to consider how best to comply.

Similarly, the EU Corporate Sustainability Reporting Directive (CSRD) has been in force since 2023, and the Corporate Sustainability Due Diligence Directive (CS3D) entered into force in 2024, with staggered compliance timelines for the implementation of reporting and due diligence obligations. The Forced Labour Regulation, which was adopted in 2024 and is expected to apply fully by the end of 2027, prohibits the placing and making available on the EU market, or export from the EU, of products made wholly or in part with forced labour, regardless of their origin.

China issued new export control regulations in October 2024. To date, China has made limited use of its “Unreliable Entity List”, adopted to counter the US Entity List.

The importance of technology has also brought tech companies – even early-stage start-ups – into the fray.

What follows are six things that business leaders and their international trade counsel must consider in navigating the regulatory challenges ahead.

Understand your supply chain – and look for patterns

Proper classification, origin and valuation determination of goods has become more important than ever, as this determines what tariffs apply and at what level. As customs violations are often criminal in nature, customs compliance has become a key priority. Significantly, there are hundreds of international trade agreements that may – even with increased assertion of national security exceptions – serve as a bulwark against protectionist forces. Multinational leaders have to analyse that web of agreements and take advantage of reliable supply chain relationships. Understanding supply chains is also key to managing trade risks.

Be ready to handle potential enforcement action

Along with increased domestic regulation is a focus on trade enforcement and heightened awareness of risk across industry. How would your company react to discovery of a potential breach, searching questions from counterparties/finance partners, an approach by authorities or whistle-blower accusations? Trade enforcement authorities are updating their guidance on how they approach penalty mitigation and therefore what companies can do even before a breach is discovered. Legal privilege, whistle-blower protection obligations, time limitations and jurisdictional scope are just some of the challenges that require careful navigation.

Leverage government allies

Executives and board members at large corporations should activate their network of natural government partners to ensure that a diversified supply chain does not fall apart in other parts of the world.

Sourcing decisions are not just about efficiency – politics is a key factor

In the past, supply chains were often designed around efficiency. Going forward, these decisions should factor in the politics of trade and supply chain regulation, and the risk of implicating subsidy-related investigations.

Diligence and rationalising third-party reliance

Third parties can pose risks, especially if business leaders are not aware of, for example, the source of foreign manufacturers’ materials or the markets that channel partners are serving. From an enforcement perspective, authorities expect operators to take responsibility and exert more control over their supply chain.

Think about exports in co-ordination with imports

Companies need to think holistically about international trade compliance, which means considering imports and exports in tandem, and not just in terms of goods flows but also in terms of services and investment flows. For instance, the US has put a number of restrictions on technology transfers to certain Chinese companies. Thus, even if tariffs may not pose a danger, a global company will need to consider relationships with manufacturers with respect to these technology transfers.

The recent slide towards economic nationalism is not historically unique. Trade agreements limit the discriminatory action that governments can take at moments they are most inclined to do so.

Governments are generally permitted to give below-market funding to domestic players in a given industry, as long as they stay within certain bounds. If subsidies go on to cause aggravated economic harm to foreign competitors in global markets, it can be cause for litigation and, in the EU under the Foreign Subsidies Regulation, impact the ability to engage in M&A transactions or participate in public tenders.

Foreign Investment and Subsidy Controls: Impediments Here to Stay

On 12 July 2023, the EU’s Foreign Subsidies Regulation (FSR) began to apply. This Regulation aims to address the potentially distortive effects on the EU market of subsidies from non-EU countries, and requires approval for certain M&A and procurement deals. The EU is increasingly enforcing the FSR, and has announced that it will review more below-threshold M&A and procurement matters. It has imposed conditions in M&A deals, caused companies to pull out of tenders, and has launched large-scale investigations including by conducting unannounced on-site inspections (dawn raids). Companies active in the EU should take pre-emptive steps to assess, mitigate and manage the regulatory risks arising from FSR.

Since 2020, there has been a sustained movement towards comprehensive investment screening by governments around the world. The Committee on Foreign Investment in the United States (CFIUS) and other investment screening authorities (including in the EU, the UK and elsewhere) have greatly expanded their reach and authority.

Now all 27 EU member states have comprehensive investment screening regimes in place or are in the process of adopting one.

Other jurisdictions around the world similarly adopted new or more stringent investment screening legislation. For example, in January 2022, the UK began to apply a comprehensive investment screening regime. Since then, the UK has seen around 900 mandatory filings each year, and regular final orders imposing conditions on an acquisition to mitigate national security risks. In 2023, Switzerland started the process of adopting FDI screening regimes.

The scope of investments covered has been significantly expanded. This means that investors need to take a more strategic approach. Business leaders and their counsel need to consider at least the following factors:

• the nature of the buyer and/or the vulnerability of the asset;
• the investor’s appetite for risk;
• the implications on deal timing and uncertainty; and
• the disclosures and potentially onerous procedures involved as part of the deal process.

In the EU, the EU Investment Screening Regulation (No 2019/452) is being reviewed to further harmonise investment screening legislation across the EU. Investors should be ready to assess investment risks relating to investment screening upfront and adopt risk mitigation strategies to address potential issues concerning the impact of a planned investment.

In particular, investors should take care when entering into negotiations and arrangements with targets, especially regarding information-sharing in the context of due diligence and the implications of investment screening on the transaction timeline. It is important to take investment screening into account when structuring transactions and when drafting transactional documents, including by considering the appropriateness of:

• a sign and close mechanism;
• ensuring that all parties co-operate to ensure that regulatory approval is obtained; and
• allocations of rights and obligations pending approval.

In addition, whereas investment screening regimes, so far, have focused on inward investments, there has been a recent focus on outward investments and possible national security aspects of transferring certain technologies and know-how abroad. Rules on outward investments have already been proposed in the US, and the EU is expected to follow shortly.