A New World Trade Order
World trade is getting rebalanced, with consumers of the Old World and producers of the New World
This became evident recently when, during the recent United Nations General Assembly in New York, Chinese Premier Li Qiang announced that his country would no longer seek access to the special and differential treatment provided for in the WTO agreements.
China’s position as the world’s leading producer and its technological advances in high-value-added sectors make it a preferred source not only for emerging markets, of which it is the main trading partner, but also for developed economies.
The PRC’s dominance in key raw materials, including rare earth elements, is a new advantage in trade negotiations with the United States and internationally. The American consumer remains the number one source of global demand. But China is an increasingly powerful global producer.
Set against this backdrop, trade routes and supply chains are being reshaped. New trade routes are enabling the growth of South-South trade.
The International North-South Transport Corridor INSTC is a multi-modal network that uses maritime, rail, and road transport to connect such ports as Mumbai in India and Bandar Abbas in Iran with Russian rail networks via the key Rasht-Astara railway. New Arctic maritime traffic opened by Russia’s fleet of nuclear-powered icebreakers is also considered strategic for countries such as India.
An Alternative Financial Settlement System and Technologies
Financial security and autonomy are paramount to the emerging economies.
The BRIC countries have taken up new technologies, such as distributed ledgers, with a new monetary infrastructure comprising a network of bilateral swap lines between the central banks of emerging markets, with accelerated vigor in the last few years to develop a new settlement system that will enable cross-border payments in local currencies.
The efforts under way are not about creating a common currency or using the Chinese yuan as an alternative to the US dollar but are aimed at affordable, reliable, and efficient financial settlements with better prospects for South-South trade.
Nuclear Deterrence
We live in a world of regional superpowers with no mutual security agreements. This places nuclear deterrence at the core of strategic competition. The surge in defense investment is a consequence of increased military spending in the budget programs of developed countries.
However, governments have restricted budgetary headroom for these expensive and inefficient military purchases. If this imperative to spend on defense does indeed become overwhelming, then Western companies risk nationalization or direct state intervention to control prices.
Indeed, the Western defense industry may face a production capacity problem, which, in turn, drives prices steeply upwards in the short run. These pressures are increasing profitability and stock prices in the short run, as we saw in 2025. Over the longer term, states might put a ceiling on defense expenditure.
Nuclear deterrence, hence enrichment programs for civil and potentially military applications, is more appealing for them.
We might see a nuclear industry revival in the West while emerging countries further develop new nuclear capacities. It is critical to underline, however, that such endeavors to invest in a more robust defense have implications well beyond military matters.
The pandemic and the Trump administration’s “America First” strategy made clear that military spending plans by the Western economies need to be complemented by broader investments in programs that range from raw materials and semiconductors to industrial production, logistics, and digital infrastructure.
These infrastructure investments will have long-term repercussions for economic growth and productivity.
Sustained demand for raw materials therefore benefits emerging assets. In this context, demand is up for precious and industrial metals and rare earth elements. Rare earth elements and their refining technology lie at the heart of the AI value chain: currently dominated by China, which already uses them to assert its commercial power vis-à-vis the United States.
A new financial settlement system might require larger gold reserves for emerging market central banks, in order to guarantee the use of the bilateral swap lines that provide liquidity in local currencies, that is a precondition for settling bilateral trade.
Increase in Central Banks Gold Reserves
According to Noble Gold Investments, global central bank gold reserves are, at 18% of total assets, equivalent to half their pre-Bretton Woods level.
Purchases by emerging market central banks might substantially increase global demand and structurally support gold prices and the producing countries of that precious metal. An alternative financial settlement system may need the emerging market central banks to have greater amounts of gold reserves.
Uranium, being at the heart of the value chain in the enrichment process of nuclear fuel, could see a surge in demand. While uranium producers are many around the world, uranium refining technology has one leader: Russia.
Demand for energy commodities such as oil, gas, and especially solar power is expected to be sustained, which should mean sustainable revenues in a technology-driven and energy-hungry world for utilities and emerging energy producers alike, plus companies that have contributed to China’s dominance in the solar energy sector.
For asset allocators, these global shifts imply a secular boom in emerging market assets and the significant revaluation of their valuations relative to other developed-world assets over time.
Because of their demographic advantages and economic size, most emerging countries will increasingly assert their growing influence on the global economy and financial markets.
