While the Republican called the verdict a “disgrace” and decided to carry on the levies, named as “global tariffs,” through alternative means, the mechanism, since 2025, has created flutters around the world. Not only did the overall global trade flow get adversely affected, Uncle Sam’s relations with allies like Canada, the European Union, South Korea and India also faced significant headwinds.

Post the SC verdict, where are things heading now? To discuss this, International Finance caught up with Linda Middleton-Jones, an advocate and ambassador for international trade. As a founder and Managing Director of International Trade Matters with over 30 years of experience in international commerce, Linda serves as an Internationalisation Specialist for “Innovate UK,” supporting innovative tech startups in global market expansion.

Previously, as the International Trade Director for Plymouth Chamber of Commerce, she created the Manufacturing Barometer (mentioned at Davos and recorded in Hansard) and the Global Trade Blueprint based on Sensemaking principles. Named “Most Influential Businesswoman in Multi-Sector International Commerce 2022,” Linda completed certified training with MIT, The Economist and the ILM.

In this exclusive conversation, Linda discusses how the “Trump Tariffs” achieved limited success in fulfilling primary goals such as manufacturing reshoring, deficit reduction and revenue generation, while generating substantial costs for American businesses and consumers alike. She also notes that businesses dependent on imported components faced higher input costs, reducing competitiveness globally.

International Finance: What is your view on the clash between the US Supreme Court and the Donald Trump administration after tariffs continued despite the ruling?

Linda Middleton-Jones: The clash exemplifies political fragmentation overriding institutional governance—a tension familiar to companies navigating competing jurisdictions. When executive authority supersedes judicial oversight, it creates unpredictability for internationally trading businesses. From my work with UK exporters through International Trade Matters, this instability complicates strategic planning and risk assessment. Companies require regulatory certainty; when political expediency trumps constitutional frameworks, it undermines the governance pillar of ESG that businesses increasingly depend upon. This isn’t merely domestic politics—it reverberates through global supply chains, forcing trading partners to question America’s commitment to rules-based commerce. The real victims are SMEs lacking resources to pivot quickly when political whims override established frameworks.

Are tariffs the only way to address serious balance of payments deficits?

Tariffs represent the bluntest instrument in economic policy—effective perhaps for headline politics but crude for addressing structural imbalances. My experience with Innovate UK (United Kingdom’s national innovation agency) demonstrates alternative approaches: investing in innovation, enhancing productivity, supporting export capability, and improving competitiveness through skills development. Japan and Germany achieved trade surpluses through manufacturing excellence, not protectionism. Balance of payments deficits reflect deeper issues, currency valuations, consumption patterns, productivity gaps, and comparative advantages. Addressing these requires systemic change: infrastructure investment, education reform, and industrial strategy. Tariffs may temporarily reduce imports but simultaneously increase costs for domestic manufacturers dependent on global supply chains, potentially worsening competitiveness. Sustainable solutions lie in enhancing export capability, not simply restricting imports.

Have tariffs helped boost US manufacturing, trade balance, or federal revenue so far?

Evidence suggests limited success across all three metrics. Manufacturing reshoring proves slow and expensive—relocating complex supply chains requires years and substantial capital investment. The trade deficit with China decreased marginally but diverted rather than eliminated—imports shifted to Vietnam, Mexico, and other nations. Federal revenue from tariffs increased nominally but pales against broader economic costs: higher consumer prices, retaliatory tariffs damaging agricultural exports, and supply chain disruptions. Companies I work with report increased costs without corresponding domestic alternatives. The Peterson Institute estimates tariffs cost American households considerably more than the revenue generated. Manufacturing competitiveness requires workforce skills, infrastructure, and innovation investment—tariffs alone cannot substitute for a comprehensive industrial strategy. Short-term political gains versus long-term economic reality.

Do Trump’s tariffs contradict the principles of free trade?

Unequivocally, yes. Free trade principles rest on comparative advantage, specialisation, and mutual benefit through reduced barriers. Tariffs fundamentally contradict these tenets, representing protectionism regardless of justification. However, the nuanced reality acknowledges that ‘free trade’ rarely exists purely—every nation maintains strategic protections around agriculture, defence, and sensitive technologies. The question becomes whether tariffs address genuine unfair practices or simply protect uncompetitive industries. China’s state subsidies, intellectual property theft, and market access restrictions warrant a response, but blanket tariffs penalise allies and trading partners indiscriminately. WTO mechanisms exist precisely to adjudicate trade disputes through rules-based frameworks. Abandoning multilateral systems for unilateral action undermines decades of trade architecture, inviting retaliatory fragmentation that ultimately harms all participants.

Could the ruling affect the China+One supply chain strategy in the near term?

The ruling creates short-term uncertainty but is unlikely to derail China+One fundamentally. Companies pursuing supply chain diversification respond to multiple drivers beyond tariffs: geopolitical risk, pandemic lessons, intellectual property concerns, and ESG considerations regarding labour practices and critical minerals sourcing. My clients implementing China+One strategies—relocating to Vietnam, India, Mexico—cite resilience over cost optimisation. Even tariff removal wouldn’t reverse investments already committed. However, reduced tariff certainty may slow new diversification investments as companies await clarity. The strategic imperative remains: overconcentration in China presents unacceptable risk regardless of tariff policy. Geographic diversification reflects long-term risk management, not merely tariff avoidance. Political instability accelerates this trend rather than reverses it.

How have tariffs strained US ties with allies like Japan, South Korea, the UK, EU, and India?

Tariffs against allies fundamentally breach the trust underpinned by decades of partnership. Japan and South Korea, critical security partners facing China and North Korea, find themselves economically targeted alongside adversaries. The UK, seeking post-Brexit trade opportunities, encountered American protectionism rather than the promised partnership. EU relations deteriorated as tariffs on steel, aluminium, and other sectors contradicted stated alliance values. India’s retaliatory tariffs on American goods demonstrate damaged goodwill. Beyond economics, these actions signal unreliability—if America weaponises trade against allies during peacetime, what commitment remains during crises? My work shows British exporters questioning American market dependence, seeking alternative partnerships. Trust, once broken, requires years rebuilding. Allies increasingly pursue China relationships, CPTPP membership, and regional agreements excluding America, fundamentally realigning global trade architecture.

Will US allies now seek more concessions after the ruling?

Absolutely. The ruling demonstrates institutional limits on executive authority, emboldening allies to press for advantages. Japan, the EU, and others will demand tariff removals, market access improvements, and safeguards against future unilateral actions as preconditions for deeper cooperation. They recognise American political instability creates negotiating leverage—businesses and states demanding trade certainty pressure the federal government toward compromise. However, allies also pursue insurance policies: strengthening intra-regional trade, diversifying away from US dependence, and building alternative frameworks. The ruling proves America’s internal divisions, suggesting allies cannot rely upon a consistent policy. Consequently, concessions sought extend beyond immediate tariff relief toward structural guarantees and dispute resolution mechanisms limiting future executive overreach. Power dynamics have shifted—America’s allies recognise they hold cards previously underutilised.

Have these tariffs become counterproductive for the US economy?

Increasingly, evidence suggests yes. Initial objectives—manufacturing reshoring, deficit reduction, revenue generation—achieved limited success while generating substantial costs. American manufacturers dependent on imported components face higher input costs, reducing competitiveness globally. Agricultural exports collapsed under retaliatory tariffs, requiring federal bailouts exceeding tariff revenue. Consumer prices increased disproportionately, affecting lower-income households. Supply chain disruptions revealed during COVID-19 were exacerbated rather than resolved. Perhaps most damagingly, America’s reputation for rules-based trade governance suffered irreparable harm, encouraging allies toward alternative partnerships. My clients report that tariff unpredictability—more than tariffs themselves—proves most destructive, preventing long-term investment decisions. When political expediency overrides economic rationality, everyone loses. Protectionism may offer short-term political satisfaction but delivers long-term economic pain.

The post Protectionism delivers long-term pain: International Trade Matters Founder Linda Middleton-Jones appeared first on International Finance.

In 2026, the real question is not whether the dollar dominates; it obviously does. The real question is whether governments are preparing for a future where they rely on it, just a bit less. A shift, yes. A revolution? Not really.

According to Bidisha Bhattacharya, economist and columnist at ThePrint, what we are seeing is not some financial revolution. It is much slower than that. Almost cautious.

“De-dollarisation is real, but it is evolutionary rather than revolutionary. The US dollar continues to account for roughly 60% of global foreign exchange reserves, down from over 70% in the early 2000s. That decline reflects diversification at the margins, not displacement at the core,” Bhattacharya told International Finance.

The fundamentals still favour the dollar – deep financial markets, extremely liquid US Treasury bonds, strong institutional trust, and powerful network effects. The more people use the dollar, the harder it becomes to replace.

“Currency hierarchies do not flip suddenly. They evolve, slowly,” she said.

The world is not abandoning the dollar; it is just becoming less dependent on it.

The gold rush — again

If there is one clear signal of this caution, it is gold. Central banks have been buying massive amounts of gold, levels not seen in decades. Annual purchases have exceeded 1,000 tonnes in recent years. This is not about returning to the gold standard or romanticising the past. It is about protection.

“Gold accumulation has become strategically significant. This is less about replacing the dollar, and more about hedging geopolitical and sanctions risk. Gold carries no counterparty risk and functions as a balance-sheet stabiliser in a fragmented global order,” Bhattacharya said.

However, markets play a role too. Mike McGlone of Bloomberg Intelligence argues that central bank demand has been pushing prices higher.

“Central banks purchased about 1,000 tonnes annually in 2022, 2023 and 2024, roughly double the previous decade’s average,” McGlone told International Finance, pointing to geopolitical tensions, including Russia’s invasion of Ukraine, as a key driver.

Yet, McGlone suggests, markets may be overheating. Gold could approach major peaks around 2026, similar to historic highs seen in 1980 and 2011. Some reserve diversification, he says, may reflect in rising gold prices rather than a fundamental move away from the dollar.

He added that most of the statistics on gold outpacing dollar reserves are due to the rapid rise in gold prices.

“Demand is notably driven by geopolitics rather than inflation concerns,” he said, suggesting easing global tensions could weaken momentum. So yes, gold is rising. But it is not replacing the dollar.

Sanctions, control, and financial vulnerability

Politics also plays a big role. Maybe more than markets.

Elnara Omarova, who works on BRICS-related policy issues, says many governments are mainly concerned about control, or the lack of it.

“The key issue is access. When central bank reserves can be frozen, or access to dollar clearing becomes politically contingent, governments start reassessing how much exposure they are comfortable carrying. Diversification then becomes less about ideology and more about insurance,” Omarova told International Finance.

This has taken several forms: larger gold reserves, more holdings in non-dollar currencies, and bilateral trade settled in local currencies. And, it has been especially seen in energy markets. But these changes remain limited. The dollar still wins on liquidity, convertibility, and market depth.

“Diversification is happening, but it is incremental,” Omarova said, describing it as risk management in a more fragmented geopolitical environment rather than an abrupt shift away from the dollar. Omarova calls it a recalibration, not a rupture.

The BRICS Debate: More noise than disruption

Much of the public discussion focuses on BRICS, and whether the group could reshape global finance. Analysts urge caution.

The influence of BRICS comes mostly from coordination, encouraging trade in national currencies, experimenting with alternative financing mechanisms, and building regional frameworks. It signals exploration, not replacement.

Lawrence Ngorand of Busara Advisors sees BRICS as pushing the world toward a more multi-polar financial system.

“The BRICS play a catalytic role, accelerating the transition toward a more multi-polar financial architecture,” Ngorand told International Finance.

Their role lies in building alternative infrastructure and gradually shifting expectations. But structural problems remain. There is no widely trusted BRICS reserve currency. Institutional cohesion varies. Therefore, the shift is evolutionary. It is slow, uneven, and incomplete.

Global trade moves beyond the dollar

This may be the toughest question. Commodity markets still revolve around dollar pricing, largely because the liquidity, benchmarks, and risk-management systems behind them are already deeply built around it.

Omarova suggests bilateral trade settlement could diversify, especially among politically aligned countries. But changing global pricing norms would require deep financial markets, credible alternatives, and global participation. That is a very high barrier.

Ngorand agrees that the dollar’s dominance is not just about politics; it is structural power: capital markets, institutional trust, and global network effects.

Regional diversification is happening, particularly in energy trade and infrastructure financing. But full displacement? Unlikely.

“The most likely outcome is not the replacement of the dollar, but the emergence of a more fragmented system where multiple currencies co-exist,” Ngorand said.

When gold stops being a safe haven

Yet the gold story is also becoming more complicated. For years, gold has been treated almost instinctively as the ultimate reserve hedge. No counterparty risk, no dependence on another country’s financial system, and no sanctions exposure. In a fragmented geopolitical world, that logic sounds almost irresistible. But, not everyone is convinced the current gold surge reflects long-term stability.

According to Mike McGlone, gold’s behaviour in markets has started looking less like a traditional store of value and more like a volatile financial asset.

“Gold has shifted toward a speculative asset from a store of value,” McGlone told International Finance, noting that its 180-day volatility has surged to about 2.4 times that of the S&P 500, the highest relative level in two decades. That is not what investors typically expect from a stability anchor.

In fact, McGlone suggests that in many financial stress scenarios, gold might not behave the way policymakers hope. Instead of rising as a stabiliser, it could actually fall when measured in dollar terms.

“In most scenarios, gold declines in USD terms,” he said.

That observation complicates the narrative that central banks are simply replacing dollar reserves with bullion. In reality, gold still trades in a dollar-dominated financial ecosystem. Its pricing, liquidity, and global trading infrastructure remain deeply tied to the very system some countries are trying to hedge against.

So, the question becomes less about whether gold can hedge geopolitical risk and more about whether it can truly function as a substitute for dollar liquidity during a crisis. So far, the answer remains uncertain.

The signalling game of ‘central bank gold’

There is another dimension to the gold story: signalling. Central banks do not build reserves only for their own balance sheets. Sometimes, what they hold also sends a signal outward to markets, to investors, to anyone watching closely.

For emerging economies in particular, the mix of reserves can quietly influence how strong or stable a country looks from the outside.

Some analysts say the recent gold buying could partly be about that, projecting resilience in a world where capital can move very quickly.

Still, McGlone is not entirely convinced that signalling explains everything.

When asked whether emerging economies might be building gold reserves partly to reassure international investors, his answer was simple: it is not entirely clear.

“I don’t know,” he said.

However, what he does emphasise is the geopolitical context that triggered the surge in demand.

Russia’s invasion of Ukraine and the subsequent freezing of foreign reserves forced policymakers everywhere to rethink financial vulnerability. The episode highlighted how even large sovereign reserves could suddenly become inaccessible under sanctions. That shock pushed many countries toward alternative assets, including gold.

But geopolitical dynamics are constantly evolving. And in McGlone’s view, the political drivers behind the gold rally may already be fading.

“The geopolitical bid is diminishing,” he said, pointing to shifting political developments in countries often aligned against US influence, including changes in Syria and evolving political pressures in Venezuela, Iran, and Cuba.

If the geopolitical momentum behind gold weakens, the rally could slow as well. Which raises an uncomfortable possibility for central banks: they may have increased their gold exposure precisely when the market was reaching peak enthusiasm.

When reserve diversification goes too far

Gold accumulation has been dramatic. In some ways, it is historically dramatic. But there is also a point where diversification strategies begin to face diminishing returns. For McGlone, that point may already have been reached.

He argues that gold prices have stretched far beyond their historical norms, reaching the largest premium relative to their 60-month moving average ever recorded, and also hitting unprecedented levels relative to the broader Bloomberg Commodity Spot Index.

In other words, markets may have already priced in much of the geopolitical risk. Gold has seen this kind of moment before.

The last time prices became this detached from historical norms was around 1980. That peak held for nearly three decades before being surpassed again during the 2000s commodity boom.

History, McGlone suggests, does not rule out a similar pattern repeating itself. Gold may simply have gone up too much.

“It faces the curse of going up too much,” he said, suggesting the market could be approaching a long-term peak like earlier historical cycles.

If that happens, central banks could find themselves holding larger gold positions at precisely the moment when prices begin stabilising or retreating. This would not invalidate diversification strategies, but it might reduce their immediate financial benefits.

What could push gold even further?

History shows that major geopolitical events can dramatically reshape reserve strategies. Russia’s invasion of Ukraine already triggered one such shift.

That event accelerated discussions about sanctions exposure, financial sovereignty, and alternative reserve assets. But what could push gold even further into the centre of global reserve strategy?

McGlone believes the catalyst would have to be similarly dramatic.

Russia’s invasion created the current surge. Replicating that shock would require a comparable geopolitical rupture. And, for now, he believes the gold momentum may already be reaching its limit.

“The risk is that the bid for gold has reached its apex,” he said.

Inside BRICS: Between unity and rivalry

If gold represents one hedge against the dollar system, BRICS represents another kind of experiment altogether. But even within the BRICS grouping, the financial dynamics are more complicated than they appear from the outside.

According to Lawrence Ngorand, China plays an unmistakably central role in shaping many of the bloc’s financial initiatives.

“China is the central gravitational force within BRICS financial initiatives,” Ngorand told International Finance. That influence stems from simple economics.

China is the largest economy in the group, the biggest trading partner for most other members, and the only one with a fully developed cross-border payments infrastructure capable of supporting large-scale alternative settlement systems.

As a result, efforts to expand local-currency trade often gravitate naturally toward the Chinese renminbi. But that influence comes with political limits.

India, Brazil, and several other BRICS members remain cautious about allowing any single currency to dominate the bloc’s financial architecture. Concerns about dependency and geopolitical balance remain strong, which is why many BRICS initiatives are carefully framed as multi-polar rather than renminbi-centric.

China brings the scale and liquidity, but the set-up of the system still tries to make sure each member keeps the sense that its own financial sovereignty remains intact.

Is a unified ‘BRICS currency’ difficult?

Even setting politics aside, BRICS financial integration runs into a simpler reality. The member economies are very different from each other.

China maintains a tightly managed capital account. India operates with partial controls. Brazil and South Africa run fairly open financial systems compared with some of the others. Russia’s financial system has been reshaped by sanctions and partial isolation. These differences complicate coordination.

Exchange-rate regimes vary. Inflation dynamics differ. Fiscal policy frameworks are not aligned. Even trade structures diverge significantly.

China’s economy is manufacturing-driven. Several other BRICS members depend heavily on commodities. Others rely more on services. These asymmetries make deeper monetary integration extremely difficult.

According to Ngorand, meaningful integration would require convergence across multiple dimensions: inflation targeting frameworks, exchange-rate policy co-ordination, reserve pooling mechanisms, and credible lender-of-last-resort structures. None of those currently exist.

“The bloc lacks the institutional cohesion that underpinned the euro project,” Ngorand said.

Commodity and currency power

Still, one area where BRICS expansion could make a difference is commodities. The inclusion of major commodity exporters within the group has strengthened the theoretical foundation for alternative trade settlement systems.

Countries like Saudi Arabia, Brazil, and Russia sit at the centre of global energy and resource flows. And commodities anchor a significant portion of global trade. If even a small share of these transactions began shifting toward non-dollar settlement, new liquidity corridors could gradually emerge. That possibility matters.

“If even a modest share of oil or critical mineral trade shifts to local currencies, it creates liquidity pools and hedging demand outside the dollar system,” Ngorand said.

However, commodity power alone does not automatically translate into monetary dominance. Even if some commodities start trading in other currencies, the money does not always stay there. In many cases, it quietly circles back to dollar assets anyway.

Take oil revenues. No matter what currency the trade begins with, a large share often ends up parked in United States Treasuries. So, commodities might open alternative payment routes, but that alone does not really dismantle the dollar system. For that, a deeper financial infrastructure would be required.

The shock that could change everything

Ultimately, the speed of any monetary transition depends on shocks. Gradual diversification can go on for years, even decades, without shaking the foundations of global finance. Systems like this rarely change overnight. But, history shows that faster shifts usually come after disruption.

Ngorand suggests that a real acceleration in de-dollarisation would likely require confidence to crack across several pillars of the current financial system at the same time. That could include large-scale sanctions affecting multiple mid-sized economies, a major disruption to global payment networks, such as SWIFT, or a severe dollar liquidity crisis.

Another possibility would be sustained fiscal instability in the United States that undermines confidence in Treasury markets, the backbone of global reserve management. In the absence of such shocks, inertia favours continuity.

“Reserve currency transitions historically occur over decades, not years,” Ngorand said. Which means the dollar system may evolve, diversify, and fragment at the edges without collapsing at the centre, at least for now.

Not the end, just an adjustment

What emerges from all this is not a collapse. It is an adjustment. Central banks are hedging. Governments are managing risk. The world feels more uncertain, thanks to geopolitical, economic, financial, and reserve strategies that reflect that anxiety. The system is becoming more hedged, more political, and slightly more multipolar.

Bhattacharya summed it up thus: “We are not witnessing the end of dollar dominance, but rather the end of unquestioned dollar comfort.”

The dollar remains at the centre. Just no longer alone in commanding unquestioned trust.

The post Sanctions or war, the dollar always wins appeared first on International Finance.

The goal was simple: securing Artificial Intelligence (AI) and semiconductor supply chains, with countries like the US, Australia, Greece, Israel, Japan, Qatar, Republic of Korea, Singapore, the UAE, and the United Kingdom feeling the urge to derisk their supply chains in the coming years. In February 2026, the group saw a notable entry, with India, the world’s fourth-largest economy, joining the alliance.

When talking about the Pax Silica, Jacob Helberg, US Undersecretary of State for Economic Affairs, told CNBC, “Pax Silica is really not about China, it is about America. We want to secure our supply chains.”

But then, the question remains: to secure from whom?

Let’s go back to October 2025, when the Xi Jinping-led China decided to tighten export controls for its critical rare-earth metals, effectively turning the global economy’s dependence upon these materials into a strategic leverage.

So, if we look at the developments that made the headlines since October 2025, we may be witnessing a phenomenon where globalisation is evolving into a pattern where it is picking sides, with supply chains getting reorganised along geopolitical lines. Is it going against the core principle of globalisation as a concept itself, which preaches the growing interdependence of the economies, cultures, and populations, facilitated by factors like cross-border trade in goods and services, technology, flow of investment, people and information.

Weaponised supply chain

Let’s go back to October 2025 again, when China announced its ’announcement number 61 of 2025’, increasing export controls for five rare-earth metals in addition to the seven the Xi Jinping administration announced in April in the same year.

Out of the 17 rare-earth metals in total, China put export restrictions on 12 of them. Not stopping there, it also placed restrictions on the export of specialist technological equipment required to refine rare-earth metals. Foreign companies were mandated to obtain special approvals from Beijing if they wished to export rare-earth magnets and certain semiconductor materials containing a minimum 0.1% heavy rare-earth metals from the world’s second-largest economy.

Citing the rationale of national security interests for the move, which has been in effect since December 2025, China made sure that foreign companies end up explaining the intended use of the product they wish to make using Chinese rare-earth metals, attacking the very basis of globalisation, which advocates unrestricted flow of cross-border trade in goods, services and technology.

The Xi Jinping administration, however, believes that since rare-earth-related items have dual-use properties for civilian and military applications, implementing export controls on them is an ’international practice’.

In October 2025, the Chinese Commerce Ministry spokesperson told these exact things to the global media: “Certain foreign organisations and individuals have been directly transferring – or processing and then transferring – controlled rare-earth materials originating from China to relevant organisations and individuals directly or indirectly for military and other sensitive applications.”

Rare-earth metals are used in the production of electric cars, lithium-ion batteries, LED televisions, AI semiconductors and camera lenses. Most importantly, these raw materials are crucial for the US defence industry. According to the Centre for Strategic and International Studies (CSIS) think tank, rare earths are used to manufacture components of F-35 fighter jets, Virginia and Columbia-class submarines, Tomahawk missiles, radar systems, Predator unmanned aerial vehicles, and the Joint Direct Attack Munition series of smart bombs.

In 2023 alone, the United States emerged as the largest importer of Chinese rare-earth minerals and products, importing $22.8 million worth of products from the world’s second-largest economy, according to the Observatory of Economic Complexity (OEC). China, in total, exported $117 million in rare-earth metals and products that year. As per the US Geological Survey report, Washington sourced 70% of its rare-earth compounds and metals imports from China between 2020 and 2023.

Some argue that China’s weaponisation of its rare-earth supply chain is a strong response to the United States limiting Beijing’s access to semiconductors in 2022. The policy, formed under the watch of the previous Democrat administration, led by Joe Biden, hasn’t changed at all, even in 2026. And the approach has been a bipartisan one, with some American lawmakers even pushing for greater restrictions, warning that Beijing could reverse-engineer or independently develop advanced semiconductor technologies, with the bid to overtake Uncle Sam in both technological and military terms. The ongoing tariff conflict between the two sides has complicated matters since the start of Trump 2.0.

Pax Silica countering Chinese pressure?

Rahul Nath Choudhury, a Delhi-based economist specialised in international trade, trade policy, investment, advisory and research who has handled several economic and trade-related projects for the Government of India’s Ministry of Commerce, World Bank, Asian Development Bank, International Finance Corporation and Singapore government’s Ministry of Trade and Industry, told International Finance that globalisation has always been transactional and geopolitically inclined towards the countries that are politically and strategically aligned and share common interests.

“Inter-country blocks, such as BRICS, ASEAN, and the EU, all have some common features. The emerging incidents like trade war, political unrest, and civil disorder have further influenced the decision of various countries to align or tilt towards like-minded countries and reduce the impact of global uncertainties. This is evident as countries increasingly enter into trade, investment and strategic agreements, with those countries that are geopolitically aligned, rather than purely based on commercial efficiency,” he said.

On the other hand, Derek Scissors, Resident Scholar, American Enterprise Institute, whose research concerns the Chinese, Indian, Japanese and other Asian economies, and their connections to the American economy, commented, “Globalisation was initiated and led by the US. The Trump administration wants to partly reverse that, to make trade and investment more transactional. However, Trump administration agreements are being reached without approval from the US Congress, and may not last beyond 2028. The long-term path for globalisation is unclear. The global economy may fade somewhat in favour of regional blocs. It’s hard to see China’s goal of taking a dominant position in as many supply chains as possible being compatible with the goals of other large economies.”

However, there is no doubt that China is weaponising its supply chains. Given that it is the largest producer of rare-earth metals, mining at least 60% and processes about 90% of these resources (as per CSIS’s report in 2024), it is going to use this as a leverage to gain a position of dominance in global geopolitics.

This raises questions about the idea of a deeply connected global economy.

Stating that he doesn’t believe in a deeply connected global economy, Derek said, “All the connections and associations have always been among like-minded countries that share common interests. We are now experiencing the emergence of a bipolar/ multipolar world where power is no longer concentrated with one country. The entire concept of a deeply connected global economy is getting reshaped with the advancement of new developments. The idea of ‘Pax Silica’ also brings together like-minded nations, which, in turn, reflects a broader shift toward concentrated globalisation, instead of one integrated global system.”

The trend now is “China Plus One”

A new feature of the post-pandemic global order is the ‘China Plus One’ business strategy. Companies are now diversifying their supply chains and manufacturing bases beyond China, adding alternative locations in Southeast Asian countries like Vietnam, Thailand or India. The reason: mitigate business and supply chain-related exposure to China, given the geopolitical tensions that crop up often between the world’s second-largest economy and the United States-led Western Bloc.

Tim Cook-led Apple has become the brand ambassador of this practice. The iPhone maker has been aggressively diversifying its supply chain in the last couple of years, placing its bets on Vietnam and India. Till COVID-19 showed up, China used to be at the centre of everything Apple used to do, especially in terms of manufacturing. Then, as the pandemic kicked in, lockdowns in key manufacturing hubs like Zhengzhou, dubbed ’iPhone City’, caused severe production bottlenecks and shipment delays for the American giant, ultimately impacting the global product availability.

Also, given that bilateral trade relations between the world’s two largest economies have been anything but normal, manufacturing and shipping products from China will always face the risk of being tariffed.

So, Apple wanted a resilient and future-proof manufacturing network and, in that pursuit, found their answers in Vietnam and India, with advantages like considerable lower labour costs, attractive government policies, and import tariff rates suiting high-tech manufacturing, and, most importantly, capturing the lion’s share of one of the world’s largest and fastest-growing smartphone markets (again India), while maintaining its sales and profits lead in the home market of United States.

Rahul Nath says, “The China Plus One strategy does not seem to be over. Companies in various parts of the world are still exploring the option of relocating their base from China to other locations, despite it being a very difficult task. I don’t see this ending in the near future, at least in 2026.”

Derek, however, had a nuanced view of the unfolding scenario.

“The China Plus One strategy is much more a response to predatory Chinese policies than US-China decoupling. The problem with American policy is its inconsistency, as with President Trump being extremely conciliatory to China prior to his trip to Beijing at the end of March 2025,” he noted.

Another trend, which is also likely to redefine the transactional nature of the neo-globalisation, is ’friend-shoring’, which is already happening in domains like technology and semiconductors, with politically allied nations (read Uncle Sam and his friends) strategically relocating supply chains in a way to gradually reduce dependence on China.

Initiatives like the CHIPS and Science Act in the US, implemented by the Joe Biden administration, incentivise domestic semiconductor manufacturing while mandating that companies receiving federal funds restrict capacity expansion in China. While preventing access to high-end semiconductors for China, to maintain an edge over Beijing in the AI race, has been a consistent policy take in the White House, irrespective of the administration’s political alignment, ’Pax Silica’ in 2026, looks like an extension of a ’Minus China’ approach – building resilient, secure, and trusted networks for critical components without Beijing.

On this, Rahul Nath said, “Today, every major government is trying to reshape their supply chains in a way that insulates them from geopolitical risks. This is affecting big businesses in all areas and influencing their strategy and investment decisions. The semiconductor industry is particularly active in responding to these changes. According to a report by The Engineer, manufacturers from the EU and the US are increasingly moving their supply chains to North America, the UK, Mexico, Vietnam, India and North Africa to minimise geopolitical risks and increase proximity to key markets. Several major projects are underway in North America. Numerous new semiconductor factories are being built in the US and Europe to boost regional production and reduce dependence on Asian suppliers.”

Middle powers’ strategic cooperation path

Hurt by China’s rare-earth minerals’ export control in 2025, European policymakers have taken a new stance, which is basically a ’do no harm’ approach. Bilateral engagement continues, while carefully avoiding escalation. And Donald Trump’s maverick approach to the continent, especially in the garb of resetting trade ties, is forcing the European leadership to seek diplomatic and commercial reassurance from the Xi Jinping government, despite structural issues like widening trade imbalances, persistent concerns over industrial overcapacity, growing unease over economic coercion risks, and China’s continued alignment with Russia remaining firmly in place.

Canada, United States’ all-weather North American ally, too, has faced a tariff onslaught from the Trump administration, forcing Ottawa to reassess its economic ties with Beijing, which were marked by years of tension on account of tariffs, import restrictions, and diplomatic disputes.

In fact, India, the latest entrant to the Pax Silica, was another global player which got hurt by Uncle Sam’s strong-arming tactics. It resulted in the Narendra Modi-led government increasing its engagement with the BRICS (supposed rival of the G7), while increasing economic engagement with China and Russia.

So, even if we take into consideration the fact that the above-mentioned incidents were results of short-term policy blips from the White House, the fact remains, there are players like India, Canada and Europe, who believe in the concept of a ’multi-polar world’, where instead of overcommitting to one particular geopolitical block, interest-driven approach will rule foreign policy and diplomacy.

Scissors said, “India is big enough to stand on its own, but only if it pursues reforms much more aggressively. Labour laws continue to favour existing workers, with the result that new workers cannot contribute properly to the economy. The demographic boom is being repressed. Smaller, but still sizable economies, should place their long-term bets on the US. America has pulled away from China in GDP over the past decade, and has a history, at least, of being open to its partners. However, these countries should also protect themselves from US policy shifts over the next three years.”

“All these middle powers are aligning or re-aligning with one or other superpowers. Global South nations are forming new trade alliances and partnerships that sidestep the US and the EU. India’s changing approach towards FTAs and partnering with new economies, like Australia and the UAE, shows its participation in bloc-based trade realignment,” Rahul Nath concluded.

The post Pax Silica: The new global order appeared first on International Finance.

The 2012-13 bailout had left its scars. There were bank haircuts, capital controls, and a new international infamy for economic secrecy. From Riga to Rome, every finance minister complained about the plight of its smaller neighbour and included a mention of “Cyprus” in their geopolitical shorthand.

Fast-forward to 2026, and the footnote has become a case study. The recent update to the real GDP growth forecast sees the pace of expansion slowing to 3.1% this year from 3.8% in 2025. Yes, it is slower than the previous year, but still remarkable for a nation to pull off during all this geopolitical volatility.

Take the latest data, for example. In Q4 2025, Cyprus’ economy expanded 4.5% on a year-on-year basis, up from 3.6% in the previous period. The milestone also marked the strongest economic expansion since Q4 2022, with the main drivers being the wholesale and retail trade, repair of motor vehicles, information and communication, and hotels and restaurants (+7.2%). Construction also recorded strong growth, rising 9.2%, while manufacturing increased by 4.7%.

In another piece of good news, tourist inflows (which skyrocketed to €3.7 billion in 2025) from the United Kingdom, Germany, Poland, Israel, Greece, France, and Sweden played a solid hand in propelling Cyprus to its historic GDP growth, while the Mediterranean island emerged as one of Europe’s most sought-after destinations. The boom also benefited the airline and hospitality industries, with airlines like British Airways, easyJet, and Ryanair expanding their services to accommodate the ever-growing number of visitors. Hotels and resorts in the island region, on the other hand, responded by ramping up their offerings, from luxury accommodations to eco-friendly resorts, ensuring a diverse range of options for all types of travellers.

Remarkable fiscal story

In 2025, Cyprus recorded a budget surplus of €939.2 million. Let that sink in for a moment. We are talking about a small island country with its own unique set of problems and challenges. The country is located in a volatile region, subject to tensions between Greece and Turkey. There are also costs associated with meeting EU targets for reducing carbon emissions and the costs of bringing salaries for government workers in line with those in the private sector. The employee salaries peaked at €4.13 billion in 2025. And yet, a budget surplus of €939.2 million was still recorded.

The ceiling for next year’s state budget is €10.7 billion, or €11.3 billion without interest costs. It is a political and economic price that was set with considerable care. In a eurozone periphery country such as Cyprus, this is something seen rarely and achieved even more rarely, as the fiscal discipline required is not always accompanied by the same degree of political consensus. The fiscal leeway was available, but action only followed as the debt crisis escalated and a new government came into power at the end of 2023, when public debt was at 73.6% of GDP. Now it is projected to fall to 52.9% of GDP by the end of 2026. This is no small reduction. It is a reduction of a historical and almost revolutionary character.

According to Cyprus’ Deputy Finance Minister Irene Piki, “Multi-year planning, more predictable policy, and fiscal space earned through responsible and reform-based ways rather than increased borrowing ensures high household, business, and investor confidence.”

She is right. And the timing of this issue must also be taken into consideration. With the war in Ukraine, energy-price volatility, and the costs of achieving the EU’s ambitious climate and digital agendas, Europe’s overall fiscal situation is extremely difficult. Most member states are feeling the strain, though a few, such as Poland, are coping better than expected. Others, like Bulgaria and Slovenia, will hardly notice any short-term impact from the EU’s fiscal rules for the next few years.

Cyprus is not in this group, but it will no longer be in the minority either. It will assume the EU Council presidency in the first half of 2026, at a time when all other member states with higher budget deficits will be trying to keep a low fiscal profile in advance of a potential EU debt-mutualisation discussion, while others will be more than happy to oblige by not questioning the fiscal prudence of the presidency. Cyprus’s economic model, which has proven itself in recent years to be sustainable despite high inflation and even though the country is heavily indebted, should attract worldwide attention during its presidency and generally face appreciation for its achievements.

The tech revolution

Here’s an honest take. Tourism is the story that gets the headlines, but tech is stealing the show, and that’s where the smart money is heading.

By the end of 2025, Cyprus’s Information and Communications Technology (ICT) sector contributed roughly 16% to national Gross Value Added (GVA). That is approximately €8.5 billion. The island now ranks second in the EU for ICT’s share of national GVA, ahead of economies with ten times the population and four times the infrastructure investment. The workforce in tech has more than tripled over the past decade, now exceeding 26,000 professionals. Cyprus ranks fifth in the EU for GVA per ICT employee. In productivity, in other words, not just headcount.

The talent pipeline is being deliberately engineered. Non-resident professionals earning over €55,000 annually get a 50% income-tax exemption. There is also a Digital Nomad Visa and streamlined residency for spouses of international workers. The type of person this attracts is mobile, high-earning, plugged into global networks, and likely to bring their employer with them or start something new once they are settled. In March 2026, the Research and Innovation Foundation sent a national pavilion to the 4YFN summit in Barcelona, showcasing eight companies in AI, robotics, and agritech. One Cypriot portfolio company, Threedium, was selected as one of only ten firms globally to present on the main NVIDIA GTC 2026 stage. That’s not luck.

TechIsland, the sector’s coordinating platform, has done the unglamorous but essential work of bridging local entrepreneurs with international executives. The ecosystem is self-reinforcing now, which is the point where you stop worrying about whether it is sustainable and start worrying about whether the housing stock can keep up.

What are the key factors helping the country’s tech sector? Let’s start with Cyprus’ geographical location. The Mediterranean island sits at the intersection of Europe, the Middle East, and Africa, giving companies access to huge markets if they prefer using the nation as their manufacturing and R&D hubs. Imagine businesses keen on maximising their prospects in the European market but also want outreach to Israel’s $100 billion tech sector, along with emerging Middle Eastern and North African (MENA) countries, Cyprus can become the base camp. Also, the country’s legal system is rooted in English common law, making it instantly familiar for those used to British or commonwealth standards.

Then comes the 12.5% corporate tax rate, one of the lowest in the European Union (EU). To sweeten things further, there is an “IP Box Regime” that results in qualifying intellectual property income being taxed at an effective rate of just 2.5%. Businesses holding IP in domains like software, AI, fintech patents, or video games get massive leverage for reinvestment and expansion in the Mediterranean island, as taxation remains simplified and pocket-friendly, compared to high-tax countries. The administration is actively courting the cause of the island nation becoming a regional tech hub by backing initiatives such as “Startup Cyprus” and the “Youth Entrepreneurship Scheme.”

Promise of energy utopia

Shipping accounts for more than 7% of the country’s GDP and often receives insufficient attention in debates that focus on new sectors. Now, though, the evidence is plain to see. The shipping sector is a major source of revenue. Cyprus alone accounts for around 4% of the global merchant fleet, while more than 20% of worldwide third-party ship-management activities are carried out from here. The figure for ship-management revenues for the first half of 2025 was €978 million, an increase of 6.7% on the previous quarter.

And that’s a lot of concentration! The top 27% of the companies account for 85% of total sales. Germany and Greece are the number one and two trading partners, respectively, accounting for 30% and 13% of sales.

In November 2023, the One-Stop Shipping Centre was established, which currently serves more than 300 shipping companies benefiting from the tonnage-tax regime. Almost all shipping companies based in Cyprus benefit from this, apart from the four historical ship-owning companies, which, in accordance with the current tonnage-tax legislation, are not allowed to gain an advantage through the new policies.

The overall gross tonnage of the Cyprus ship registry has increased by 20% over the last two years, reaching the highest level in the last two decades. A real and tangible effort is being made to modernise shipping further through the sponsorship of robotics and digital-technology-related scholarships and the upgrading of the associated educational infrastructure, as well as research into alternatives and new methods to support the greening of shipping. Shipping contributes significantly to the island’s employment sector, both in terms of direct and indirect on-shore employment (over 9,000 people) and the huge number of seafarers (80,000 and more) employed onboard vessels managed by companies based in Cyprus and therefore also indirectly contributing to the economies of the ports of call. Cyprus wants to maintain and further develop this very important sector.

Gas fields have been “coming soon” for years, and one can excuse the sarcasm. But now, for the first time in more than a decade, all indications are that 2026 will actually see the start of production of two giant offshore fields in Eastern Mediterranean gas. The Aphrodite gas field in Block 12, estimated to hold between 3.9 and 4.5 trillion cubic feet of gas, is slowly but surely moving towards its commercial development, following the recent memorandum of understanding signed by Egypt, Cyprus, and Chevron over the proposed pipeline project that will transport the gas from Cyprus to Egypt. The Kronos field in Block 6, operated by Eni, is also expected to reach a final investment decision this year, with first gas scheduled for 2028. The fact that the distance between the field and the Zohr field in Egypt, where the necessary infrastructure has already been built and is currently being used, will be largely compensated for by the intended infrastructure that will be built for the purposes of transporting Aphrodite’s gas to Egypt.

The energy situation in Cyprus is quite tough domestically. The EU carbon-allowance price is projected to reach €95 per tonne by 2026, and there is no exception for Cyprus in terms of compliance with the EU ETS, which will cost €490 million this year and will also be transferred to consumers through energy bills. The LNG terminal of Vasilikos, which has been delayed for many years, is expected to enter operation during the second half of 2026. The Great Sea Interconnector, which connects the Cypriot electricity grid with the Greek grid via Israel, is still considered a strategic investment, but is more at the level of intentions so far.

The offshore gas story is truly a major issue for the Eastern Mediterranean region’s energy future. In the meantime, however, Cypriots are forced to endure among the highest energy prices in the region. That is where the current government’s otherwise respectable record falls short.

Tax exemptions to the rescue

The story of the revival of the banking system in Cyprus is a very long and fascinating one. We are talking about a sector where non-performing loans (NPLs) comprised 49% of the total outstanding loans in 2016. It was not so much a sector with problems that required remedial action; it was a complete banking crisis that had been frozen in time. Today, the total of NPLs as a percentage of total outstanding loans is 3.2% at the end of 2025. The downward trend of NPLs, following a period of stagnation that coincided with the imposed capital-control regime of 2013, reflects in part the huge quantities of NPLs that have been sold and in part the successful completion of a large number of restructuring plans of exposures.

There was a big change in Cypriot tax law, and we believe it is the first significant change in tax laws introduced in the last two decades. The new laws took effect on 1 January 2026. Under the catch-phrase of meeting the OECD Pillar Two global minimum-tax rate, we are talking about a drastic increase in the corporate-tax rate from 12.5% to 15%. As such, it has been a very controversial move, and one can very easily understand why. But it was an inevitable decision.

Dividend tax has increased. The deemed-dividend distribution rules for profits earned after 2026 have been abolished. The special defence contribution on the actual dividends paid out from profits earned after 2026 reduces from 17% to 5%. The personal-income-tax-free threshold has increased to €22,000 from €19,500. The 8% flat tax on cryptocurrency gains and the 120% super-deduction for qualifying research and development expenditure are a couple of steps taken towards the future. A couple of things to note regarding the recent corporate-tax-rate increase and how it is being applied in the professional-services sector. Companies in the sector are already shifting toward digital assets, AI-related regulation, and wealth-mobility advisory services in response to the tax-rate increase. The pace of change can be dramatic.

Misfortune of thriving real estate

The consequences of rapid expansion are inevitable. As reported earlier, property transactions in January 2026 reached their highest level since 2008, with 1,411 contracts being deposited, an 11% increase on the corresponding period last year. Annual price rises in Paphos and Famagusta reached 25% and 23% respectively. The value of transactions in the Limassol premium market accounts for a third of the total.

As we already know, the rate at which property prices increase is around 5%–7% annually, and salaries in the country are still not high enough to absorb even remotely the current rental rates. Rent accounts for a staggering 32.3% of the average household’s monthly income in Limassol. The average monthly rental price for a one-bedroom apartment in the city centre of Limassol is around €1,300.

The government plans to complete 244 affordable residential properties allocated to low-income families in all major municipalities across the country by the end of 2026, while a private partnership is expected to deliver 1,000 affordable rental homes, with the municipality also expected to set aside €16 million for a new subsidised project in Limassol and €12 million for a similar scheme in Strovolos. This is not bad, but there are still very few measures to curb the problem of affordable housing. Remember, however, that problems related to affordability usually go unnoticed for years until they hit the headlines and cause mayhem.

Tourism income has reached €3.69 billion, up 15.2% year-on-year, with visitor numbers exceeding 4.5 million for the first time, and tourism’s share of GDP standing at around 14%. A services surplus of over €2.8 billion was recorded in the third quarter of 2025 alone, in large part due to the goods-trade deficit being a structural feature of the economy.

Tourism is trendy but is cyclical, weather-dependent, geopolitically volatile, and above all requires low-cost air travel. In the technology and shipping space, the trends are more structural. We are not diminishing the success of tourism, which remains very strong, but policymakers need to remember that it is just a base that needs to be expanded upon rather than a plateau to be sat out on.

The bottom line

The future looks promising, but it is not without challenges. The job market is extremely tight, with unemployment at just 4.5%. It means everyone who needs a job has a job, but there aren’t enough workers to boost spending power any further.

Cyprus has 1.38 million people and is one of the EU’s smaller member states, with most of them residing in cities like Nicosia and Limassol.

Though the population is growing through immigration, the median age is around 40 years, which means that people are ageing quickly and productivity is decreasing. On top of that, birth rates are really low, with around 1.5 children per woman.

Cyprus is struggling to find fresh talent. And it is in a race against time. If they cannot find enough working population to support their rapidly ageing population, their economy could suffer greatly.

Moreover, foreign firms invest heavily in Cyprus but pull back profits. The repatriation of profits contributed to around 7% of the GDP account deficit. The Fiscal Council notes that domestic reinvestment is weak and FDI seems “transient” without deeper local ties.

To combat this, Cyprus introduced new screening rules. From April 2, 2026, non-EU and Swiss investors need pre-approval for €2 million plus deals that require a 25% or more stake in strategic sectors such as AI, tech, health, and energy. If they do not comply, they risk fines up to €50,000 or a shutdown due to non-compliance. The bureaucracy adds two to three months of delay, increased legal fees, and various uncertainties for companies that want to invest in the island. Investors might want to look for other nations with better ease of doing business.

Cyprus has historically attracted FDI through lax rules, but is now forced to align these standards with the EU. However, this oversight often leads to increased friction through red tape, and geopolitical checks (Investigating Russian and other controversial links). Foreign investors were drawn to low taxes and golden passports, which ended in 2020. Massive FDI, especially from Russian companies, peaked at $33 billion in 2015 and fueled the real estate boom. Russian investments reached 80% of the total FDI of Cyprus. However, it also enabled round-tripping and sanction evasion after the Ukrainian crisis.

The 2024 data from the Central Bank of Cyprus reveals that Russian FDI stock in Cyprus hovers at €83.46 billion and has plummeted drastically from €135.7 billion in 2022. The €52 billion drop is attributed to Western sanctions and geopolitical tension.

Look, small open economies are always vulnerable to things they cannot control, such as energy shocks, regional conflict, shifts in EU policy, and global capital-flow reversals. Cyprus is not immune. But the combination of fiscal discipline, a diversified sectoral base, a sophisticated banking system, and a government that has made genuinely difficult structural decisions creates a degree of resilience that was not there a decade ago. These are not vanity metrics. They are signals that the growth dividends are being reinvested rather than extracted.

Is everything perfect? No. Energy costs remain a drag. Housing affordability is a genuine social tension. And the gas fields, however promising, have a long way to go before they change balance-of-payments arithmetic.

But Cyprus in 2026 is a fundamentally different proposition than it was in 2013. It has earned the right to be taken seriously. Definitely not as a tax-haven footnote or a bailout cautionary tale, but as a small economy that looked hard at what it wanted to be and built its way toward it with more discipline than most expected. That’s a story worth telling.

The post Cyprus: The island rebound appeared first on International Finance.

It’s not a fad. We are seeing a permanent decoupling of economic activity from resource extraction, driven by several key factors, including continuous inflation that is eroding the purchasing power of regular people, acute resource scarcity threatening supply chains, and tightened regulations forcing corporations to internalise environmental externalities.

The statistics are clear. The global secondhand fashion and luxury market is projected to reach approximately $360 billion in the next four years and is growing three times as fast as the primary market. The market can be broken down into several key segments. The global secondhand apparel market reached $200 billion in 2023 and is expected to hit about $350 billion in 2028. It represents an incredible compound annual growth rate of 12%. The luxury resale segment is expected to grow from $32.47 billion in 2024 to $50.06 billion by 2030. The primary driver behind this growth is the “assetization” of luxury goods. The refurbished electronics market is also growing rapidly and is projected to hit $65 billion through 2029, with an annual growth rate of 14.2%. Finally, the secondhand furniture market is expected to reach $91.6 billion by 2027.

Well, the public narrative is mostly about fashion, but there’s a lot more going on. For example, when it comes to consumer electronics, there is something called the Right to Repair movement. It is now being codified into law across the European Union and several United States jurisdictions.

The legislative momentum creates entirely new secondary markets for refurbished devices, validated by sophisticated grading standards and data sanitisation technologies. But it’s important to note that rapid change creates complex contradictions. Resale as a service has commoditised circularity. The change has empowered fast fashion giants to launch resale platforms that many argue are a way to hide systemic overproduction through what people call greenwashing. At the same time, AI and digital product passports are emerging as critical infrastructure to bridge the trust gap in secondary markets.

The resale market has effectively separated from traditional retail cycles, functioning less like a distressed asset class and more like a preferred primary consumption channel. Growth is not uniform across geographies. In the United States, 87% of consumers cite affordability as their primary motivator, 11 percentage points higher than their European counterparts. Conversely, the European market is heavily influenced by regulatory pressures and a cultural inclination toward wardrobe curation, supported by denser networks of independent vintage stores.

The global cost-of-living crisis has acted as a potent accelerant, shifting circularity from a sustainability feature to a household survival strategy. Persistent inflation has forced consumers to trade down to secondhand goods to maintain brand access without primary market premiums. It’s particularly evident in electronics, where flagship smartphone prices exceeding $1,400 push consumers toward certified refurbished models selling for 30% to 40% less. However, the psychology extends beyond frugality. A “treasure hunt” dynamic drives engagement, with nearly 50% of resale buyers citing the search experience as a key enjoyment factor. For Generation Z, resale has become the primary discovery channel, with 80% using resale platforms to explore brands they haven’t purchased firsthand, effectively making the secondary market a gateway for primary luxury customer acquisition.

A primary brand hesitation is cannibalisation fear, but data from BCG and RaaS providers suggest the opposite. Cannibalisation has already occurred on third-party sites; by reclaiming this volume, brands capture revenue, customer relationships, and data. Furthermore, brand-owned resale increases customer lifetime value. Programmes like Lululemon’s “Like New” drive loyalty by rewarding trade-ins with store credit that is almost inevitably spent on new inventory, creating a flywheel where secondary markets subsidise primary purchases. Resale shoppers are often aspirational consumers who eventually graduate to buying new, effectively lowering customer acquisition costs for new segments.

Unlike forward logistics, which ships identical palletised items, reverse logistics processes unique items with varying conditions, defects, and values, requiring specialised infrastructure. Companies like Optoro use AI to determine the next best action for returned items to maximise recovery value, reportedly diverting 95% of returns from landfills. However, the cost of processing a single used garment can exceed its resale value. RaaS providers leverage volume and proprietary data to drive costs down, but profitability remains challenging without subsidy from primary brand marketing.

In the luxury sector, the goods are increasingly viewed as tradable assets, sometimes outperforming traditional investments. The market grows at 7.48% annually, fuelled by aggressive primary market price increases that make the secondary market the only accessible entry point for many consumers. The existential threat is counterfeiting, giving rise to AI-based authentication services.

Entrupy uses microscopic computer vision, analysing materials with 99.1% accuracy and offering financial guarantees. The RealReal employs hybrid AI tools, filtering high-risk items for human expert review. The watch segment is projected to reach 35%-40% of the global market by 2030, with mechanical durability making watches ideal for multiple ownership cycles.

The electronics resale market is driven by functional utility and grading standards. Back Market forecasts €3 billion in gross merchandise value in 2025, driven by inflation and the desire to avoid the massive carbon footprint of manufacturing new devices.

A critical barrier to corporate electronics recycling is data privacy. Blancco provides enterprise-grade sanitisation, ensuring devices from banks or hospitals can be safely resold, automating diagnostics and erasure for up to eighty devices simultaneously. The EU’s 2024 Right to Repair Directive forces manufacturers to provide spare parts and manuals for seven to ten years, fundamentally altering refurbishment economics and breaking planned obsolescence cycles, empowering independent repair shops that are critical to local circular economies.

Without digitisation, the circular economy cannot grow. A product’s journey (made, reused, repurposed) needs one steady digital link. By the late 2020s, EU rules will quietly require Digital Product Passports for clothes and tech items. These digital records store fixed facts, such as where a product started, what it’s made of, whether it can be fixed, and whether it can become new material. Starting from a shared base, the Aura Blockchain Consortium takes shape through collaboration among LVMH, Prada, and Cartier. Built around uniform blockchain systems, each item receives a distinct digital form. Should a product change hands during resale, those new owners gain access to linked records, unchangeable proof of origin and past possession. Instead of full public visibility, Aura applies controlled networks where openness meets boundaries, supporting trustworthy changes in ownership, especially where market value runs high.

The government used to encourage recycling through policy, until very recently, but now it is mandating circularity. The EU is leading the change globally, exporting regulatory standards worldwide through the “Brussels effect.” It helps multinationals adopt EU standards to simplify the supply chain.

The Right to Repair Directive by the EU came into force in June 2024. It is an incredible piece of legislation because it requires manufacturers to repair goods even outside legal guarantee periods, mandates the creation of a European online repair platform, and standardises repair information forms.

Not to mention the Eco-Design for Sustainable Products Regulation, which imposes tough standards by demanding durability, reusability, upgradability, and repairability from the start of product design. Also, the Waste Shipment Regulation prohibits plastic waste from leaving OECD borders after 2026. This regulation has led to an increase in recycling within Europe instead of shipping trash abroad.

Unlike the EU’s federal approach, the United States relies on state-level legislation, creating complex compliance maps. California, Minnesota, New York, and Colorado have passed vigorous Right to Repair laws. California’s SB 244, effective July 2024, requires parts and manuals for electronics and appliances costing over $100 to be available for seven years, crucially not excluding business-to-business equipment. Manufacturers cannot easily make California-only versions, so these laws have national ripple effects. Without federal equivalents to EU regulations, US companies often default to EU standards to maintain global supply chain consistency, essentially importing EU regulations.

They say the resale boom is a great win for sustainability, but if we critically examine it, there are some inconsistencies in that claim. For example, fast fashion brands have adopted resale aggressively. Some argue that these are sophisticated greenwashing tactics that distract people from the core overproduction business models. The Changing Markets Foundation is one such critic. Shein, for example, produces thousands of new styles daily using ultra-fast fashion models that rely on synthetic materials and labour exploitation. The platform might contribute only a microscopic fraction compared to what dominates sustainability marketing.

Investigations have revealed that clothes taken back through take-back schemes and other systems often end up incinerated, downcycled, or exported rather than resold. By using tracking devices, investigators have found that items in perfect condition were destroyed or lost, exposing a significant lack of transparency.

Academic research confirms rebound effects, where efficiency gains are offset by increased consumption. When consumers can sell used clothes, they may feel financially and morally justified in buying more new clothes. Studies estimate substitution rates at 1:1.23, implying resale markets might actually increase overall throughput rather than reduce primary production. Consumers buy with the intent to resell, treating clothes as temporary holdings. Similarly, the environmental savings of refurbished smartphones can be offset if consumers use monetary savings to buy more devices or upgrade more frequently, nullifying carbon reduction benefits.

By 2030, resale is expected to comprise 10% of the total global fashion and luxury markets. In high-value categories like handbags, secondhand items already make up 40% of consumers’ wardrobes, indicating saturation, where “used” becomes normal. The distinction between new and used retail channels will blur, with major retailers offering both side by side. The circular economy is inherently labour-intensive, requiring a human touch for repair, authentication, sorting, and logistics. The ILO and World Bank estimate the sector already employs 121 to 142 million people globally, poised to be a major engine of green jobs offering employment that is difficult to offshore.

The ultimate evolution is the dissolution of ownership toward “usership” models, where goods are leased or subscribed to through Product-as-a-Service. In such a model, manufacturers retain ownership and responsibility throughout product lifecycles, aligning incentives perfectly. If manufacturers pay for disposal, they design products to last forever and be easily repaired. Right now, it’s rare, yet forecasts show it spreading into expensive household items by 2030, especially as trash disposal gets more costly. At that point, Digital Product Passports probably won’t be hard to find for high-end products, letting shoppers scan a secondhand coat and immediately access details like the farm origin of fibres, handworker location, past owners, repair tips, plus reuse value.

Nowhere is change clearer than in how goods move across borders. Pushed by need, rules, and tools that connect economies differently, old ways of making and moving things fade. Even though doubts about real sustainability linger, with fake claims, energy tradeoffs, and delivery hurdles adding pressure, forward motion cannot stall. A time when buying and tossing came easily now shifts toward reusing, repairing, and reusing again. Nowhere is change clearer than in what companies must do about used goods. Instead of resisting, smart players are learning to shape these secondary trades. Success in the years ahead hinges less on selling new items than on turning every product into profit.

The post The permanent circular economy appeared first on International Finance.

Approximately 30,000 people have died in the fighting, and, when accounting for starvation and disease, the total number of casualties exceeds 400,000. After Omar al-Bashir was overthrown in a coup in 2019 by the Sudan Armed Forces (SAF) and the Rapid Support Forces (RSF), some believed this could mark a new beginning for the nation. However, the formerly allied factions went back on their promises and began battling for power instead of working to restore civilian rule. This situation serves as a stark reminder of what can happen when political discourse breaks down, and a nation becomes fractured due to political and economic greed.

What the numbers really show

The IMF’s April 2025 World Economic Outlook places Sudan’s consumer price inflation at 100% for 2025 on average, a projection that reflects the scale and persistence of price pressures.

Complementing that, the IMF country page for Sudan shows consumer prices rising at triple digits, with real GDP projected to contract slightly in 2025, highlighting a stagflationary environment, which is a rare combination of high inflation, slow economic growth, and elevated unemployment, a squeeze that is both deep and sustained.

World Bank monitoring confirms continued macro fragility, with the May 2025 “Sudan Economic Update” describing entrenched supply constraints, administrative dislocation, and conflict-driven disruptions that keep inflation elevated and unstable.

A World Bank Macro Poverty Outlook note for Sudan indicates inflation decelerated to 78.4% year over year by July 2025, which is a notable moderation that still leaves households struggling as broad money growth, foreign exchange scarcity, and a persistent parallel premium feed through to prices.

When factories are looted, the farms burned, the roads severed, and banks shuttered or relocated under duress, price signals stop disciplining markets and start reflecting scarcity, fear, and speculation.

What fuels inflation?

How can anyone stabilise prices when the country is being torn apart by a civil war that began in April 2023 and has displaced millions, severed supply chains, and turned food, fuel, and cash into instruments of leverage?

United Nations updates since early 2025 have called Sudan the most devastating humanitarian and displacement crisis in the world.

The World Bank’s Sudan overview makes the connection explicit, describing how conflict has produced wide-ranging economic and social damage that constrains production, distorts logistics, and crushes livelihoods, which elevate price pressures and entrench volatility.

Moreover, standard economic analysis often misses the “shadow economy” of resource theft. In Sudan, this is not a small detail. It is the primary engine of the conflict. Official reports state that Sudan produced 64 tonnes of gold in 2024. This record amount should have injected billions into the banking system. It did not.

The reason is simple. Data indicates that between 50% and 80% of this gold is smuggled out of the country. Economic analysts estimate this results in a loss of up to $7 billion in annual revenue. This massive sum bypasses the government entirely. Instead of backing the currency, the wealth flows directly to armed factions like the RSF, who control key mines in Darfur.

Investigations reveal that over 90% of this gold eventually lands in the United Arab Emirates. The proceeds then return to Sudan in the form of weapons rather than food or medicine. This creates a self-sustaining “Gold-for-Guns” loop. The inflation crisis will never end while the nation’s most valuable asset is used to purchase the very bullets destroying it.

Currency collapse and the price spiral

Currencies are stories about credibility, and Sudan’s story has been a slow-motion implosion that turned precipitous as the war intensified.

Radio Dabanga reported that the US dollar surpassed 2,100 Sudanese pounds on the parallel market by July 2024. This violent depreciation quickly translated to increased prices for imported goods and basic necessities linked to import cost structures.

Further reporting captured the widening spread between official and parallel rates, with banks quoting markedly below street prices as the market premium crystallised into a daily tax on transacting outside privileged channels.

The World Bank’s 2025 update documents an official rate around 2,019 pounds per US dollar by March against a parallel rate near 2,679, quantifying an approximate 21% premium that distorts price discovery, encourages hoarding, and penalises the poorest who cannot arbitrage.

By June 2025, Xinhua described a further slide with the dollar trading at 2,760 on the parallel market and the official rate at 2,100, which is an exchange rate anatomy that maps directly onto continued price instability.

None of this is abstract because every currency gap creates space for speculation, counterfeiting, and rent extraction that show up as empty wallets and thinner meals for ordinary households.

Sudan executed a dramatic exchange rate adjustment in February 2021, moving the official rate from 55 to 375 pounds per dollar as part of a push to unify rates and restore competitiveness, a necessary step that proved insufficient in the face of political upheaval and then all-out conflict.

Any talk of new exchange rate reforms without parallel moves on security, revenue, and banking resilience will founder on the same rocks because credibility is earned through results that people can see on shelves and in markets.

That is why the IMF’s WEO snapshots matter less as forecasts to memorise and more as calls to restore the basic preconditions for price stability, starting with security, access, and institutional capacity.

Human cost of inflation

The numbers tell a story of collapse, but behind them are people, millions of them. According to UN assessments in 2025, tens of millions of Sudanese now depend on aid just to survive. Entire families are on the move, fleeing violence and hunger, while basic services such as water, health, and electricity fall around them.

The World Bank says poverty is surging and the economy has shrunk again, year after year. Latest data suggests that 26 million (around half the population) are starving, and the nation has more people living in famine than the rest of the world combined. There is also a 40% drop in income, and food inflation has tripled. People have no money for food, medicine, or fuel.

Even if inflation slows a little by mid-2025, it is still devastating. Prices are still high. And because food, housing, and transport make up most of what people spend on, it is the poorest who bear the most.

Humanitarian groups like ACAPS have been sounding the alarm for months. Food prices are spiking far above their multi-year averages. For example, the price of grains like Sorghum and millets in 2024 is 500% higher, which is six times, than in 2023. And it seems to be getting worse.

Markets are fractured. Imports are stuck. Traders are being taxed by armed groups at every checkpoint. Sudanese traders are being taxed or asked for protection money by both the Sudanese Armed Forces (SAF) and the Rapid Support Forces (RSF), as well as civil authorities and local militia. The cost of transit for goods itself is appalling. For a single truck to make a return trip in South Sudan, the cost of taxes and bribes to all competing parties is about a whopping $3,000. There are reports that supply trucks pass through almost 100 checkpoints controlled by rival factions on a one-way trip.

It is a human catastrophe that shows, in real time, what happens when war, misrule, and neglect destroy not only a country’s currency but its capacity to care for its people. The displacement map is also a price map because each wave of movement shifts demand toward fragile urban centres and import-dependent corridors where logistics premiums are already elevated.

Almost 13 million people have been displaced, and 8–10 million are internally displaced. It means that they have fled their homes but are still in Sudan. The rest have fled to Chad, Egypt, South Sudan, and Ethiopia. In that environment, the line between profiteering and survival blurs, and public authority’s absence invites every private tax imaginable, each one manifested in the final price paid in cash or in kind.

Inflation erodes purchasing power, social cohesion, trust in institutions, and the perceived fairness of the economic game, which, in turn, depresses participation and investment.

A broken banking system

If conflict is the match, policy failure is the kindling, and fiscal dominance is the wind that keeps the blaze alive.

Sudan’s central bank has not operated with full independence in years, subordinated to urgent fiscal needs that have encouraged money creation and administrative controls rather than credible anchors and transparent rule-making.

The World Bank’s country work points to disrupted cash replacement, mobile money curbs, and administrative interventions that respond to immediate pressures but often add frictions that widen parallel gaps and degrade confidence.

Banking infrastructure has been looted, relocated, or shuttered across key corridors, with more than half the system at times effectively disabled, which means intermediation is impaired and the transmission of policy signals is weak to non-existent.

When broad money grows 29% in six months, as the World Bank notes for early 2025, in a context of supply destruction and FX scarcity, the predictable result is persistent inflation, even if the monthly path wobbles with seasonal harvests and sporadic aid.

There is an irony here that should not be lost on anyone. The more the state leans on the banking system to absorb shocks it cannot price, the more fragile and politicised that system becomes, and the less able it is to perform the basic tasks of payments, savings, and credit without distortion.

There is no visible horizon for the conflict, and the Sudanese people are experiencing one of the worst economic crises of our times, comparable to the people of Palestine, Yemen, and Ukraine.

Humanitarian access must expand quickly as an inflation management tool that floods famine-threatened regions with food and health services, breaks speculative hoarding, and normalises logistics so that price expectations can reset.

Diplomatic leverage must prioritise a ceasefire that enables corridors and markets to function safely because every day of war deepens scarcity and every week of scarcity hardens inflation expectations.

The post Sudan’s war on survival appeared first on International Finance.

Why must we accept the premise that a nation so unbelievably rich in gold, coltan, and tungsten, a nation that should be an economic powerhouse, is instead condemned to perpetual, bloody volatility? Tell me why, when the answer is staring us directly in the face, who profits?

The chaos you observe in Eastern DRC is manufactured, financed, and a guaranteed revenue stream for the powerful patrons operating just across the border, using their immediate geographical advantage as an economic tool.

Look at the resurgence of the March 23 Movement, the M23, a powerful armed group whose very origins are rooted in the devastating aftermath of the 1990s Rwandan genocide, confirming that this cycle of conflict is deep, historical, and externally driven.

The M23 claims to fight against systemic discrimination of ethnic Tutsis, a convenient political fiction designed to provide cover for their true, brutal objective, the military and economic control over the vast mineral wealth of North Kivu.

Their security claims are merely a shield, a flimsy pretext for securing lucrative, unregulated artisanal mining sectors, ensuring that external patrons can deny responsibility while the resource drain continues unabated.

The M23’s latest offensive is the most damning evidence of their capabilities and their explicit state-level backing. This was a sophisticated military campaign culminating in the seizure of Goma, the provincial capital of North Kivu, in January 2025, a decisive military and logistical victory.

Immediately after the conquest, the M23 plunged hundreds of thousands of civilians into chaos, creating a humanitarian siege by severely restricting crucial aid access and consolidating territorial control through sheer terror.

This pattern is clear: M23 advances directly correlate with spikes in resource extraction and export by neighbouring states, proving that state policy is deliberately designed to maintain chaos just across the border, creating a vast, lawless, and profitable extraction zone disguised as a conflict zone, a war sustained by calculated, cold-blooded design.

Who truly arms the proxy

How can we continue to describe the M23 as a local rebel force operating independently or on scraps of local funding? It is an absurdity. How can a decentralised militia repeatedly defeat a national army, capture strategic cities like Goma, and even push towards Bukavu, utilising military tactics and resources only available to a sovereign state? The answer is laid bare in the explicit and absolutely damning findings of the United Nations Group of Experts.

The evidence presented by the United Nations (UN) is conclusive, it is undeniable, and an indictment. As far back as December 2022, the UN Group of Experts provided clear, verifiable evidence that a neighbouring state, specifically naming the Rwandan Defence Force, provided material, operational, and logistical support to the March 23 Movement.

This is a documented indictment of state sponsorship of an armed group involved in systematic atrocities, representing a serious violation of international law and the sovereignty of the DRC, is it not?

The final 2024 report of the Group of Experts, S/2024/432, confirmed the profound and continuing external involvement, noting the unauthorised presence of external forces operating in the Eastern DRC in a manner inconsistent with the sovereignty and territorial integrity of the DRC.

The most crucial, most strategically significant detail confirming this state-level involvement is the documented deployment of sophisticated weaponry, including surface-to-air missiles, by this neighbouring state, alongside occurrences of GPS jamming and spoofing activities.

It confirms only one thing: the M23 is acting as a fully integrated, heavily armed proxy force, directly challenging DRC sovereignty and escalating the conflict far beyond traditional guerrilla warfare. This is a professionalised, state-sponsored military project, where the M23 is used as a shield to test advanced military doctrines and technologies, all while the sponsoring state denies direct involvement to avoid international sanctions and accountability.

Despite these explicit UN findings detailing state sponsorship, the deployment of SAMs, and sovereignty violation, effective international sanctions targeting the sponsoring state have been conspicuously absent, sending a clear, criminal signal that the financial benefits of the war economy currently outweigh the political will to enforce accountability. What an outrage.

How conflict minerals escape

The core motivation for sustaining this violence is simple: it is rapacious, it is entirely about resources. Eastern DRC holds some of the world’s most extensive deposits of critical raw materials, minerals essential to global electronics and high-end consumer markets, including gold and the so-called 3Ts, Cassiterite, Coltan, and Wolframite, the sources of tin, tantalum, and tungsten.

These minerals move through supply chains that are intentionally opaque, beginning in isolated artisanal mines and ending up in your smartphones, your medical devices, and your aircraft components, illustrating the direct, bloody connection between Congolese suffering and global consumption.

The structure of this resource extraction maximises profit while minimising local benefit. The majority of mining in Eastern DRC is artisanal, conducted with minimal mechanisation, existing either in a legal grey area or entirely outside government control.

This extra-legal status is fundamentally critical because it leaves the miners, who have no recourse to legitimate government protection, completely open to ruthless exploitation by armed groups. The M23 and other militias enforce systemic exploitation and what the UN refers to as modern slavery, subjecting miners, including children, to inhumane working conditions to secure their revenue streams, the hidden human cost of your digital life.

Once extracted, these resources, which include gold generating millions of dollars yearly for armed groups, are immediately moved through local sales agents, negociants, and trading houses, comptoirs. This is the moment of laundering, the critical juncture where the Congolese blood mineral is washed clean by being deliberately blended with minerals sourced from other, supposedly conflict-free sources.

Neighbouring countries, including Rwanda, Uganda, Burundi, and Tanzania, play a significant and necessary role in these routes, acting as jurisdictional laundering hubs, providing the final, sanitised export receipt.

Groups like the FDLR and other armed factions obtain millions of dollars yearly from gold alone, gold that is immediately trafficked through neighbouring countries like Uganda and Burundi. The M23, leveraging its state backing, taps directly into this immense resource drain, ensuring its substantial war chest remains perpetually full regardless of international outcry.

Resource extraction and re-export constitute a core, illicit component of the economic policy of M23’s patrons, designed to capture and monetise Congolese wealth under the convenient cover of legitimate commodity trading.

Despite international mandates like the US Dodd-Frank Act requiring due diligence for these minerals, the system is demonstrably porous and totally ineffective, allowing countries with advanced processing capacity, like Rwanda with its gold refinery, to act as essential hubs, meaning global consumers are unwittingly subsidising the M23’s campaign of terror. Is that not a sickening reality?

Statistical evidence of economic fraud

If the political pronouncements of neighbouring capitals are built on systematic denials, then the trade statistics are the hard, quantifiable evidence of their deep economic deception. We must confront the trade figures directly.

How, we must ask, do countries with relatively small-scale domestic mining operations suddenly become disproportionate global exporters of high-value Congolese minerals? The data consistently reveals an undeniable economic fraud, a Great Mineral Mirage constructed solely to mask massive resource theft from the DRC.

Look at the stark contradiction evident in Rwanda’s coltan exports. Coltan is essential for capacitors in mobile devices, and its trade is subject to international scrutiny. Since 2022, the precise period that coincides with the M23’s latest, most destructive offensive, Rwanda’s coltan exports have increased sharply, yet its domestic tantalum production has demonstrably stagnated, an impossible economic feat without illicit imports.

This is a statistical confession, mirroring patterns from the 1990s when Rwandan forces controlled much of the DRC, and Rwanda became a leading coltan exporter despite mining none of the mineral themselves at the time. The M23 provides the military mechanism, and Kigali provides the legally sanitised export documentation.

The gold trade offers an even more egregious statistical disparity that quantifies the sheer scale of the theft. Rwanda exported an enormous $555.7 million in gold in 2022. Contrast this enormous sum with the official bilateral trade figures from the DRC, which show that it exported only $3.5 million in gold to Uganda in 2023.

This massive, hundreds of millions of dollars gap in highly liquid, untraceable wealth demonstrates conclusively that the vast majority of Congolese gold, forcibly extracted by armed groups, is being illegally funnelled directly into neighbouring states’ official export ledgers.

Rwanda also holds disproportionate global market shares in other key Congolese minerals, reporting 31% of total global tungsten exports and 14% of total tin exports in 2022, confirming Rwanda’s role as the primary consolidation and re-export hub for 3Ts forcibly sourced from the DRC. The figures confirming the reliance on laundered resources are indisputable.

The toll of unchecked violence

We have established the financial incentives and the geopolitical machinations fuelling this conflict, but we must never, ever allow the statistics of trade to overshadow the staggering human price paid for every illicit ounce of gold and every illicit shipment of coltan that leaves the Congo. This is an escalating human rights catastrophe, where the M23’s advances translate directly into mass death, displacement, and systematic terror, confirmed by the evidence.

The humanitarian landscape in Eastern DRC was already dire, with over 21 million people requiring humanitarian aid, one of the highest figures worldwide. The M23’s renewed offensive has exacerbated this crisis to unimaginable levels. Between January and February 2025 alone, the M23’s expansion displaced over 1.15 million individuals across North and South Kivu.

Critically, 660,513 of these were people who had already been displaced, confirming that the M23 specifically targets vulnerable populations to maximise territorial clearance and control. Approximately one million people have been forced to seek refuge in neighbouring countries, an entire population dispossessed.

The M23’s method of conquest involves war crimes and atrocities utilised as a systematic tool of control, not accidental collateral damage. Reports from Amnesty International and Human Rights Watch confirm summary executions, arbitrary killings, and the widespread use of gender-based violence, constituting war crimes and potentially crimes against humanity.

In Goma, following the January 2025 occupation, Human Rights Watch documented the summary execution of at least 21 civilians in the Kasika neighbourhood, emphasising that these were deliberate acts carried out to solidify control through sheer terror. Witnesses recounted M23 fighters going house-to-house, summarily killing every adult male they found and subjecting scores of women to rape, heinous, unspeakable crimes.

The deliberate targeting of infrastructure and aid demonstrates the clear intent to maximise civilian suffering and create a humanitarian siege. Humanitarian infrastructure and warehouses have been systematically looted, severely compromising the necessary humanitarian response, with large quantities of food, medicine, and essential medical supplies lost in targeted attacks on UN agencies and non-governmental organisations.

With the Goma airport closed and most roads connecting the city inaccessible due to M23 restrictions, the control exerted by the proxy force effectively isolates vulnerable populations, weaponising hunger and disease to drive displacement and secure unpopulated mineral zones. It is monstrous.

Global accountability is essential

The narrative is now undeniably clear. The evidence, presented by the United Nations and confirmed by trade statistics, is overwhelming. The M23 conflict is a sophisticated, self-funding economic enterprise, a cycle of violence deliberately orchestrated by state patrons and fuelled by the illicit profits of gold and coltan. We have seen the UN indictments, we have seen the quantifiable statistical anomalies, and we have documented the devastating human cost, so why, why does the world remain silent? It is a question of profound moral failure.

The international paralysis is fundamentally geopolitical, driven by the very interests that profit from the conflict. Regional diplomatic efforts intended to broker peace, such as the Luanda and Nairobi processes, have repeatedly collapsed under the weight of vested interests and profound mistrust between Kinshasa and the neighbouring capitals.

When the DRC government insisted that the Luanda Process remain strictly between sovereign states, refusing to commit to dialogue with the M23, the sponsoring state effectively cancelled a scheduled peace agreement, demonstrating that the proxy force itself is utilised as the central obstruction to a durable peace, a cynical display of power.

The failure of regional mechanisms, coupled with the lack of decisive international action following the UN’s explicit findings of external state support and the deployment of sophisticated weaponry, creates an environment of absolute, total impunity.

The operational nexus of the war economy is undeniable. External state support enables M23 operations, which secures artisanal mines through systematic terror, which funds the armed groups, which funnels resources through neighbouring export hubs, and this entire, horrific cycle is successfully shielded by global diplomatic inertia. How can we stand for this? The current system of supply chain due diligence, designed to prevent conflict mineral trade, has failed spectacularly, demonstrably. What more proof do we need? We must recognise that until the financial lifeline of the M23 is severed, the violence will continue unabated. Therefore, the international community has a profound moral and legal obligation to act decisively, to stop hiding behind process, and to impose targeted accountability. This requires immediate, verifiable sanctions targeting the specific corporate entities, the trading houses, and the smelters operating in neighbouring states that participate in mineral blending and laundering.

We must move beyond the abstract notion of “conflict minerals” to target the concrete financial structures that monetise the violence, directly targeting the estimated millions of dollars yearly that bankroll this war. The world must starve the war economy, impose rigorous accountability upon the state patrons who enable it, and demand that the flow of blood minerals stops funding the conflict that continues to condemn one of the world’s richest nations to absolute poverty and ceaseless violence. We must break this cycle, or we will remain eternally complicit in the crime.

The post Eastern Congo’s stolen future appeared first on International Finance.

The recent defeat is reflected in the significant decline of US diplomatic expectations. Wendy Cutler, a former US trade negotiator, confirmed to the Wall Street Journal that current trade negotiations have entirely set aside structural matters.

The objective is no longer advancing the relationship through fundamental change but achieving mere de-escalation and stability. Uncle Sam’s strategy has devolved from demanding systemic change, such as forcing a shift to domestic consumption or ending industrial subsidies, to simply managing crisis stability, confirming that years of tariff warfare yielded nothing but tactical adjustments and an exhausted diplomatic corps.

The US trade war’s unintended primary achievement was proving that China could withstand external economic pressure. By lowering expectations from achieving profound structural reform to settling for simple relationship stabilisation, the United States has signalled to Beijing that its state-led economic model, driven by the Chinese Communist Party, is unassailable.

This undermines the US’ credibility in future negotiations globally, a geopolitical price that far outweighs any temporary trade concessions. The US deployed its greatest economic weapon, access to its immense market, to demand change.

When Beijing retaliated by weaponising its dominance over rare-earth metals and disrupting the US’ agricultural sector, the cost of sustained friction became politically prohibitive for the American system, forcing this abandonment of structural goals. This tactical surrender is a direct, quantifiable measure of the effectiveness of China’s counter-coercion tactics.

The decades-long faith in engagement, pursued through successive US administrations, was a profound political delusion, an act of intellectual self-comforting that ignored the clear warning signs.

The historical premise of this policy rested on the belief that drawing China into the global trading system, notably through its accession to the World Trade Organisation in 2001, would inevitably lead to political liberalisation.

That hope has been comprehensively dashed. The ensuing decades saw not political openness, but the reverse. Chinese leader Xi Jinping, who consolidated power in 2012, has systematically tightened his control over the domestic political system and civil society more broadly.

This failure was inherently ensured by Beijing’s rigid political identity. Evidence suggests that the Chinese Communist Party fundamentally rejects the idea that the rule of law should take precedence over the Party’s leadership role in governing the state. This stance creates significant obstacles to any transition toward a true, open market economy.

Furthermore, the failure of engagement was significantly exacerbated by the failure of global enforcement. The US and the international community failed to utilise the tools available under the WTO to hold China rigorously accountable for its commitments, providing Beijing the space to pivot sharply toward a state-centric, CCP-run economy.

This political tragedy confirms that the US supported China’s entry on terms that proved wholly ineffective in securing Beijing’s embrace of an open, market-oriented trade regime. China weaponised the benefits of global integration to strengthen its state apparatus and industrial planning. The policy of engagement was a Trojan horse that ceded geopolitical advantage and accelerated CCP power.

Predictable collapse of tariff warfare

The Donald Trump administration, armed with tariffs and rhetorical fury, thought its economic might could intimidate history and force a fundamental shift in Beijing’s economic DNA. They were tragically, predictably wrong. The flawed strategy sought to move China away from what was correctly identified as a mercantilist policy of subsidised manufacturing and export focus.

The mechanism was based purely on market mechanics, imagining that tariffs would squeeze exports and compel Beijing to initiate painful social reforms, specifically overhauling health and social welfare systems, which would allow China’s 1.4 billion consumers to spend more and save less. The idea was that by pressuring exports, China would be forced to find new sources of growth at home, boosting global consumption and shrinking its massive trade surplus.

This strategy failed catastrophically because it entirely ignored China’s ideological commitment to its state model. Oliver Melton, a director at Rhodium Group, states plainly that Washington has very little ability to influence China’s macroeconomic strategy because the two nations hold fundamentally different ideological understandings of what drives economic growth and development.

China’s commitment to manufacturing and industrial production as the wellspring of national prosperity is absolute. Beijing viewed the trade war not as a simple economic negotiation over market access, but as a severe test of national will and security.

The failure of tariffs to achieve structural change confirms that Beijing is willing to absorb immense short-term economic pain and dislocation to defend its foundational industrial state model, a resolve the US completely underestimated.

Why Beijing refuses to spend

The weak level of household consumption in China is a deliberate political choice essential for funding the industrial state apparatus. Analysis confirms that China’s long-term economic stability absolutely requires a transition to household consumption as its investment-led model yields diminishing returns. Even some Chinese officials grudgingly acknowledge that the country’s consumption is far too weak and express a desire for some rebalancing.

However, the necessary structural reforms are gargantuan, requiring a fiscal overhaul that Beijing views as politically unacceptable. Meaningfully boosting consumption requires structural reforms to address issues like the rural-urban divide, the precarious position of migrant workers, and the deep misallocation of capital currently controlled by state-owned enterprises and banks.

The total fiscal resources required to fund social infrastructure, public services, and ongoing social transfers needed for a durable shift would amount to tens of trillions of RMB, approximately 30% of China’s GDP.

Such a massive fiscal commitment is an existential threat to the powerful nexus of state-owned enterprises, local governments, and central planners that currently control the flow of capital. The efforts seen so far have been piecemeal, stymied by ideological attachment to industrial production and wariness of politically painful reforms in taxation, healthcare, and social welfare.

For Xi Jinping and the Chinese Communist Party, redistributing 30% of the nation’s capital to the populace to boost consumption is perceived as an act of weakness that would destabilise the existing political system and threaten the Party’s command over the economy, hence the resolute refusal to change the growth model.

Beijing’s response to the American tariff assault was immediate, disciplined, and ruthlessly strategic, a calibrated move that forced the United States onto the defensive and rapidly exposed the limitations of American economic coercion.

Rather than capitulating, Beijing retaliated with stiff countermeasures, using its leverage over critical supply chains and strategically targeting politically sensitive US sectors, such as halting purchases of soybeans to punish America’s agricultural ecosystem.

This counter-coercion was built upon decades of deliberate industrial policy aimed at securing dominance in strategic materials. China weaponised its near-monopoly position on rare-earth elements, critical minerals essential for defence, electric vehicles, advanced semiconductors, and green energy technology.

China established its leverage through decades of concerted industrial policy and now accounts for approximately 91% of global rare-earth refining. When the trade war heated up, Beijing imposed stringent export controls on these critical materials, establishing an economic weapon that allows it to inflict targeted pain directly on American companies reliant on these inputs.

The American assumption that high tariffs alone would secure surrender proved far less damaging than China’s targeted, chokepoint-based retaliation, cementing China as an economic peer rival capable of defying the world’s longstanding superpower.

The systematic failure of the United States to achieve its stated goals is laid bare by key economic metrics, which confirm the persistence of China’s export-driven imbalance and the scale of the necessary, yet politically impossible, consumption reforms.

Xi’s chokepoint strategy

Henry Farrell, a professor of international affairs, argues that the trade war taught Xi Jinping the necessity of reducing reliance on the United States in critical areas such as semiconductors, confirming that Washington’s pressure was entirely counterproductive.

In response, Beijing strategically hardened its system. China systematically identified perceived “chokepoints,” sectors where it was reliant on foreign inputs, and launched a determined, whole-of-nation strategy to achieve self-sufficiency, rapidly building up domestic industries, developing alternative sources for inputs, and carefully husbanding its strengths.

The ultimate geopolitical goal articulated by this strategy is not improved trade balance, but political autonomy. Beijing seeks to maximise its freedom to pursue its own national interests without the United States being capable of determining its destiny through technological or economic coercion. This shift elevates industrial policy from a matter of economic efficiency to a core mandate of national security and geopolitical warfare.

Beijing’s official policy response to American pressure, the “Dual Circulation Strategy,” is a fortress doctrine designed for resilience and siege, not for peace or global integration. The blueprint for China’s future was made clear in its latest five-year plan, which confirmed Beijing’s absolute intention to double down on this path. The plan reemphasised its commitment to technological self-sufficiency, pledging to pour more investment into advanced manufacturing and boosting exports.

The “Dual Circulation Strategy” aims to insulate the domestic market from external shocks by vertically integrating production and eliminating bottlenecks in technology and natural resources. This involves focusing heavily on the internal market while leveraging the Belt and Road Initiative to secure reliable external demand and open markets in the emerging world.

This inward pivot, born from the pressures of the trade war, is a powerful dual threat to the global economy. By aggressively seeking self-sufficiency in high-end inputs, China deliberately cuts off major high-tech exporters like the United States, Japan, and Germany.

Simultaneously, the external circulation component ensures China will use its growing geopolitical reach to export its industrial overcapacity and deflationary pressures globally, creating new and pervasive structural trade friction worldwide.

Controlling the global component chain

While Washington obsessed over tariffs and finished goods, Beijing executed a strategic masterstroke by weaving itself so deeply into the core machinery of global production that true decoupling became an impossibility. China has strategically shifted its focus from being merely the final assembler of finished products to dominating intermediate goods and core components.

Dinny McMahon, head of markets research at Trivium China, told the Wall Street Journal that the consequence is pervasive; virtually any manufactured goods purchased globally, no matter origin, now carries some exposure to Chinese supply chains.

This dominance is structural and non-replicable in the short term. China holds dominant positions in multiple critical electronic products and raw materials. Mainland China hosts over 50% of global manufacturing for Printed Circuit Boards (PCBs), the fundamental backbone of all electronics.

Furthermore, China’s chemical industry alone contributes over 40% of global chemical production, a critical input for countless industrial processes.

Experts confirm that relocating final assembly processes is relatively straightforward, but the real obstacle, the “difficult middle stages,” lies in replicating China’s established infrastructure and expertise in complex component production, such as metal moulding and speciality chemicals.

The US strategy fundamentally failed to comprehend that the centre of global manufacturing gravity had moved. China has successfully forced the world into a state of strategic interdependence where Beijing holds the most essential chokepoints, allowing it to overcome decoupling efforts and export restrictions by leveraging its deep local supply chains.

China is suffering from domestic economic malaise and is actively weaponising its internal crisis, exporting deflation and systemic instability to the world. The rampant, state-subsidised production in China continues to far outstrip weak domestic consumption, leading to menacing domestic deflationary pressures. China is an exceptional case, the first G20 economy to report a year-on-year decline in consumer prices since August 2021.

This crisis is now a global problem. China’s export prices are collapsing, pushing inflation rates down globally. Between April and December 2023, Chinese export prices fell by 6%. Crucially, prices for machinery and electrical equipment, inputs essential for Western industry and technology, dropped 8.4%.

This overproduction, particularly in sectors like steel, aluminium, and advanced clean energy technology, is now flooding global markets and aggressively suppressing prices. The systematic undercutting of global prices in key strategic future industries, such as electric vehicles and solar panels, is an effective extension of China’s mercantilist industrial policy.

This forces foreign firms into unhealthy, unsustainable competition, capturing global market share by systematically destroying the profitability of rival industries in advanced economies. This is economic warfare waged with weaponised low prices, supported by state funding, subsidies, and cheap financing.

Perhaps the most profound moral indictment of China’s rigid, export-focused system is its detrimental effect on the development pathways of poorer nations.

Eswar Prasad, a professor of trade policy, notes that China’s ballooning goods surplus and resolute refusal to rebalance its model actively stifles manufacturing in other countries.

This specifically targets poorer economies trying to nurture a domestic factory sector, as China refuses to cede significant ground in lower-value manufacturing, even as it achieves dominance in high-value goods like aircraft and chips.

The historical promise that China’s rise up the value chain would create growing markets for labour-intensive manufactured goods from other emerging markets has been systematically dashed. Developing economies are being crowded out of manufacturing by Chinese overcapacity, blocking their essential path up the value chain.

China increasingly competes head-on with these nations in the low-tech and mid-tech space. The consequence is a global South dilemma, where China remains primarily a source of supply, not a reliable source of demand, creating profound structural imbalances and mounting trade friction even with its supposed developing partners. Beijing must undertake aggressive reforms, including allowing the renminbi to strengthen and boosting imports, to ease the intense pressures these trade flows are creating.

The trade war was doomed before the first tariff was levied because Washington and Beijing are locked in a conflict between two mutually exclusive economic ideologies. The US insists on painful reforms toward consumption-led growth, but Beijing’s leadership reemphasises its absolute commitment to industry-led technological self-sufficiency and boosting exports. This is the unmovable object meeting the unstoppable force.

The structural reality is clear: without aggressive, politically traumatic reforms to restructure the economy, China’s growth trajectory will inevitably slow while trade friction with every trade partner, both in the North and the South, will increase dramatically.

The world must now prepare for a future defined by China’s chronic structural imbalances, a reality created by the failure of the United States to understand the ideological foundations of its rival. The quantitative evidence for China’s systematic export of its industrial surplus and deflationary pressure is overwhelming.

Necessity of a new strategy

The US trade war achieved nothing of its stated goals, confirming only the profound political and ideological resilience of China. The American effort resulted in the confirmation of China’s resolve, cementing its status as an unyielding peer rival fully capable of determining its own destiny.

Uncle Sam’s objective was inverted. Washington now accepts tactical de-escalation, having squandered years on a flawed, unilateral campaign that only taught Beijing how to harden its system and solidified its commitment to industry-led growth.

The comprehensive failure of unilateral American tariffs against a centrally controlled, cohesive state apparatus demands a multilateral reckoning. The only viable path forward in response to China’s entrenched industrial model and its resulting weaponised deflation requires coordinated, unified action. This unified front must encompass Europe, Japan, and other critical partners globally.

The strategy should go beyond simply applying tariffs. It must focus on systematically neutralising China’s leverage at critical points, countering the systemic instability caused by its enforced overcapacity, and offering alternative development paths for emerging economies that are currently being overwhelmed by Chinese overproduction.

This is the final verdict on the grand delusion, the profound political naïveté that defined decades of US-China engagement. The geopolitical tragedy is that China leveraged that era of hope to construct a state fully immune to American economic coercion. The trade war showed Xi Jinping how essential it is for China to reduce reliance on the US and develop economic weapons to strike back.

China, having successfully defied the world’s superpower on the matter of structural reform, now moves forward along an unchangeable path of technological autonomy and industrial dominance. The world must now adapt to China’s reality, a geopolitical shift that ensures escalating global friction and will redefine the structure of the 21st-century economy.

The post China’s defiance exposes US failures appeared first on International Finance.

It was an explosive valuation underpinned by a massive expansion in the labour force itself. There are currently 50 million global creators, a population that exceeds the number of people working in many traditional industrial sectors. The workforce is growing at a compound annual growth rate of 10 to 20%, ensuring a steady supply of new talent and content inventory for platforms to monetise. Yet, despite the scale, the industry remains top-heavy. Research indicates that only about 4% of these 50 million creators are deemed professionals, defined as those earning more than $100,000 annually. The remaining 96% constitute a vast long tail of amateurs and aspiring professionals who are fighting for visibility in an increasingly saturated attention economy.

The economic engine of the creator economy is fuelled primarily by brand partnerships. Despite the hype surrounding direct-to-fan monetisation models, roughly 70% of creator revenue is still derived from brand deals. It statistically highlights a critical dependency (creators rely heavily on corporate marketing budgets) and explains why brands are paying such close attention. Brands are no longer viewing creator marketing as an experimental line item. They are a core component of their digital strategy. As digital media consumption rises, the efficacy of traditional interruptive advertising declines, forcing capital into environments where engagement is organic and trust is already established.

However, the integration of creators into the corporate machine requires sophisticated tooling, and the intersection of the creator economy and Customer Relationship Management (CRM) becomes vital. As Salesforce notes, a marketing CRM is now essential for managing the potentially overwhelming process of creator campaigns. Brands are moving away from ad-hoc spreadsheets to enterprise-grade systems that track engagement, attribute website visits to specific creator posts, and calculate the lifetime value of customers acquired through these channels. By treating every creator as a mini-campaign, brands can use CRM data to log interest, nurture leads, and optimise content strategies based on hard performance metrics rather than vanity metrics like likes or views.

The death of social graph

To understand the volatility and opportunity within such an economy, one must recognise the fundamental shift in how content is distributed. The industry has moved from the social graph to the interest graph, a transition that has redefined the mechanics of digital fame. In the era of the social graph (dominated by early Facebook and Instagram), content distribution was determined by connections. Users saw content because they followed a creator or were friends with them. Discovery was limited by the size of one’s network, favouring established celebrities and those who accumulated large follower counts early on.

Today, platforms like TikTok, YouTube Shorts, and Instagram Reels utilise the interest graph. The model serves content based on user behaviour and predicted interest regardless of social connections. The algorithm analyses dwell time completion rates and interaction signals to build a dynamic profile of what the user wants to see. It then surfaces content from anyone (even a creator with zero followers) that matches those interests. The shift has democratised virality, allowing a creator to reach millions overnight without spending years building a follower base. However, it has also introduced extreme volatility. A creator can have one video reach 10 million views and the next reach 10,000 because the concept of a follower is becoming less relevant. The algorithm does not guarantee that followers will see a creator’s posts. Meaning reach must be earned with every single piece of content.

The “meritocratic” pressure creates a relentless psychological grind for creators. The need to constantly feed the algorithm has precipitated a severe mental health crisis within the industry. Recent studies reveal that 62% of creators experience burnout and 52% suffer from anxiety. Most alarmingly, 10% of creators report having suicidal thoughts related to their work, a rate nearly double the national average for US adults. It’s a crisis exacerbated by financial instability, as 69% of creators report feeling financially insecure despite their public success.

The psychological toll is compounded by the nature of the relationship between creator and audience and is known as a parasocial relationship, a one-sided bond where a viewer feels a sense of intimacy and friendship with a media figure. Unlike traditional celebrities who are admired from afar, creators are relatable figures who film in their bedrooms and share their personal failures. Here, a pseudo-friendship is created that drives high conversion rates for brands because recommendations feel like advice from a trusted friend.

However, maintaining such a relationship requires constant identity work. Creators must balance authenticity with curation, presenting a filtered self that attracts followers while periodically revealing their “no filter” self to maintain relatability. The circular loop of performance is exhausting because the creator can never truly be “off” when their personality is the product.

In response to saturation and the pressure to sell a new trend, a new trend known as “de-influencing” has emerged, which involves creators telling their followers what not to buy. Far from being a rejection of the creator economy, de-influencing represents its maturation. It addresses audience fatigue and growing scepticism toward constant product promotion. By being honest about bad products, creators prove they are not mere shills, which paradoxically increases their influence and trustworthiness when they do recommend a product in the future.

The new rules of monetisation

Given the fragility of algorithmic reach and the mental toll of the content grind, savvy creators are aggressively diversifying their revenue streams. The industry is moving beyond simple brand endorsements toward a more robust set of business models. Four primary pillars of monetisation are reshaping the landscape. They are donation, transaction, subscription, and membership.

The donation model functions as a digital tip jar relying on the altruism of the audience. Platforms like “Buy Me A Coffee” allow fans to make small one-off payments. While easy to set up, the model is highly unpredictable and often carries a stigma of begging, making it difficult to scale into a six-figure business. The Transactional model (selling a specific digital asset like an online course or eBook) allows creators to capture the full value of their IP immediately. These are launch-based business models, meaning revenue comes in spikes and requires constant marketing effort to find new customers.

The subscription model (popularised by Patreon) offers the holy grail of recurring revenue. By gating content behind a monthly fee, creators can generate a predictable income. However, one needs a large, loyal existing audience and a consistent content output to prevent churn. The most evolved form is the membership model, which combines subscription with community. Here, the value proposition shifts from access to content to access to peers. A model that boasts the highest retention rates because members stay for the community even if they consume less content.

A critical tool in this diversification strategy is the evolution of the “Link-in-Bio.” What started as a workaround for Instagram’s restriction on outbound links has morphed into the creator’s primary storefront. In 2025, tools like Hopp and PUSH.fm function as mini-websites that integrate branding, e-commerce, and lead capture. A creator might go viral on TikTok (the discovery engine) but will immediately funnel that traffic to their Link-in-Bio (the monetisation engine) to capture email addresses or sell merchandise. The defining playbook of the professional creator is simple. The rent reaches social platforms while owning the audience via email and direct sales.

Furthermore, the demographics of monetisation are shifting. Gen Z creators are approaching the industry with a different mindset than their Millennial predecessors. Data shows that 85% of Gen Z creators rely on native in-platform payouts, signalling a high trust in the platforms themselves, while Millennials are more likely to build diversified ecosystems off-platform. Gen Z values speed and transparency, rejecting “gatekeeping” and preferring “plug-and-play” tools that allow them to monetise from day one.

We are also witnessing the integration of Web3 technologies as a layer of ownership. While the speculative mania has faded, the utility of blockchain remains relevant for creators seeking true independence. Non-Fungible Tokens (NFTs) and smart contracts allow creators to enforce royalties on secondary sales, ensuring they participate in the value appreciation of their work. By 2025, the global NFT market is valued at roughly $49 billion, with gaming and utility tokens driving the majority of transaction volume. Token-gating allows creators to build portable communities, where the membership list lives on the blockchain rather than on a centralised server, giving them protection against de-platforming.

AI, regulation, and the C-suite

As the creator economy professionalises, it is becoming increasingly intertwined with corporate power structures and advanced technology. The most significant disruptor is artificial intelligence. In 2025, nearly 91% of creators utilise AI in their workflow. We have entered the era of the “Content Centaur,” where human creativity is augmented by AI tools to script videos, generate thumbnail art, and even clone voices for dubbing. Efficiency is the name of the game, and it allows a single creator to output the volume of content that previously required a production team.

Beyond content creation, AI is automating the business side of influence. “AI Agents” are now capable of negotiating brand deals, managing calendars, and tracking invoices. Platforms are deploying autonomous agents that can scan brand databases, send personalised outreach emails, and negotiate preliminary contract terms without human intervention. For brands, it reduces the administrative burden of influencer marketing, which has historically been a high-friction channel involving endless email back-and-forth.

The rise of synthetic media and “Virtual Influencers” challenges the very definition of a creator. CGI or AI-generated personas like Lu do Magalu (Brazil) and Lil Miquela (USA) have amassed millions of followers and secured blue-chip brand partnerships. Lu do Magalu is the most followed virtual influencer in the world with over 46 million followers, acting as a virtual employee who never sleeps, never ages and never generates a scandal. The virtual influencer market is projected to reach $8.5 billion by 2030, offering brands total control over their messaging.

However, the corporate and technological convergence has drawn the eye of regulators. The Federal Trade Commission (FTC) has aggressively updated its guidelines to govern this decentralised workforce. The days of ambiguous disclosures are over. New guidelines mandate that disclosures must be “clear and conspicuous” and “unavoidable” to the average consumer. Crucially, these regulations explicitly cover AI. If a brand uses a virtual influencer or an AI voice, it must be disclosed to avoid deceiving consumers. The FTC now holds brands and agencies liable for the compliance of their influencers, forcing companies to implement strict monitoring tools to avoid fines that can reach over $50,000 per violation.

The rapid professionalisation is reflected in the corporate hierarchy itself. We are seeing the emergence of the “Chief Creator Officer” (CCO), a C-suite executive dedicated to shaping an organisation’s creative vision and managing relationships with the creator economy.

Companies like WPP Media in Australia have already appointed CCOs to bridge the gap between traditional marketing and the creator ecosystem. It’s a role that acknowledges that creativity is no longer just a marketing tactic. Without a doubt, it’s a core business driver. Furthermore, universities are beginning to offer formal education, with institutions like Syracuse University launching dedicated centres for the creator economy to train the next generation of digital entrepreneurs.

Profiting from epidemic of isolation

Loneliness is no longer merely a public health crisis. In 2025, it has evolved into a sophisticated asset class. As social disconnection reaches epidemic levels globally, the technology sector has pivoted to monetise isolation with ruthless efficiency. Data reveals that one in four adults globally now report feeling chronically lonely, with the figures spiking to 73% among Gen Z. What was once viewed as a societal failure is now being treated as a total addressable market projected to reach a valuation of $140 billion by 2030.

The economic shift is driven by the rise of artificial intelligence companions, which offer a simulation of intimacy that is available on demand and immune to rejection. The explosive growth of the new sector is undeniable. Companion apps have recorded an 88% year-over-year growth rate with over 220 million downloads globally. The demand is so potent that even industry giants like OpenAI have adjusted their safety guidelines. The company recently updated its policies to allow for “erotica for verified adults,” acknowledging the historical truth that intimacy (simulated or otherwise) is one of the few things consumers will reliably pay for online.

The business model behind this phenomenon is akin to a mobile game where emotional connection is gated behind microtransactions. Users can download a basic “girlfriend” or “boyfriend” bot for free, but must pay for the relationship to deepen. Features like image generation or the ability for the AI to “remember” previous conversations often require the purchase of tokens or premium subscriptions. It’s a “pay-to-remember” mechanic that monetises the user’s desire for continuity and care, turning emotional validation into a recurring revenue stream. The economics are starkly consolidated, with the top 10% of companion apps capturing 89% of the sector’s revenue, indicating that the winners are those who can most effectively simulate a parasocial bond.

And by no means is it a trend limited to Western markets. In China, the “loneliness economy” is fuelled by a demographic shift in which the single population has exceeded 240 million people. Tech firms like Luobo Intelligence have launched “emotional robots” such as the Fuzai (or Fuzozo), which are marketed as “portable emotional companionship” for both single adults and the elderly. These devices bridge the gap between a pet and a chatbot, providing physical presence combined with algorithmic responsiveness.

The psychological implications of such an economy are profound. Platforms are manufacturing intimacy at scale using “micro-gestures” and first-person language to trigger the brain’s social reward systems. The signal to move away from generic broadcasting to millions and prioritise one-on-one relationship simulations has already been received by thousands of creators worldwide. However, the financial extraction is explicit. As companies refine these tools, they are proving that in a world of increasing isolation, the most valuable product is not content but companionship itself. By 2030, the sector will likely rival the traditional gaming industry in size, entirely built on the monetisation of the human need to be heard.

The age of ownership

The trajectory of the creator economy toward a half-trillion-dollar valuation by 2027 is a testament to a fundamental reorganisation of global commerce. We are witnessing the industrialisation of influence where the lines between personal identity and corporate entity are irrevocably blurred. What started as a quest for likes has evolved into a battle for ownership (ownership of audience, ownership of data, and ownership of revenue).

For brands, the message is clear. The creator economy is not a trend to be dabbled in but a market condition to be mastered. The shift from the social graph to the interest graph means that resting on the laurels of established followers is no longer a viable strategy. Relevance must be earned daily. For creators, the challenge is to transition from being renters of algorithmic reach to owners of sustainable businesses utilising tools like newsletters, membership sites, and smart contracts to insulate themselves from platform volatility.

As we look toward 2027, the winners will not necessarily be those with the loudest voices, but those with the most resilient infrastructure. Whether it is a solo creator using AI agents to manage a global merchandise empire or a multinational corporation appointing a Chief Creator Officer to navigate the nuances of parasocial trust, the future belongs to those who understand that in the digital age, influence is the most valuable currency of all.

The shift isn’t just about creators making money online. It shows how broken the old systems are. Platforms promise freedom, but they still hold the power. Algorithms decide who eats and who burns out. Brands talk about authenticity, yet most creator income still depends on selling trust to advertisers. That tension won’t disappear.

The smart move forward is ownership. Creators who don’t own their audience will keep riding a rollercoaster they don’t control. Brands that don’t respect creators as long-term partners will keep wasting money on short wins. Artificial intelligence will speed everything up, but it won’t fix the core problem: people are tired, lonely, and easy to monetise.

The creator economy has grown up, but it’s not healthy yet. The next phase won’t reward hype. It will reward creators and companies who build stable income and honest relationships.

The post Creator economy monetises isolation appeared first on International Finance.

The rise in unemployment starting in September showed deeper changes happening in Australia’s workforce. It hit 4.5%, the highest since November 2021. Things got psychologically and economically worse as the unemployment rate crossed the 4% mark, signalling the conclusion of the era of ultra-low unemployment.

Jeff Borland, Professor of Economics at The University of Melbourne, recently prepared an analysis that highlighted a critical divergence where the economy was creating jobs at a slower pace than the population was expanding.

In 2025, the Australian economy added an average of approximately 12,900 new employed persons each month. While this indicates positive growth, it fell woefully short of the labour supply expansion. The number of people looking for work grew by an average of 22,100 per month during the same period.

This phenomenon is deeply rooted in Australia’s demographic trends, particularly the high rate of net overseas migration, which has sustained population growth at approximately 2.0% per annum. In contrast, total employment growth over the year to November was only 1.3%.

This gap of 0.7 percentage points represents a structural widening of labour market slack that monetary policy is specifically designed to induce. The Reserve Bank of Australia has maintained a restrictive cash rate setting precisely to cool the demand for labour and align it more closely with supply capacity. The September 2025 data suggested that this transmission mechanism was working, perhaps faster than anticipated.

However, the narrative became more complex with the release of data for October and November 2025, which showed a reversion of the unemployment rate to 4.3%. This volatility raises questions about the reliability of monthly seasonally adjusted figures and suggests that the September spike may have been amplified by statistical noise or temporary sampling variations.

Nevertheless, the broader trend lines confirm a softening market. By November, the stability of the 4.3% rate masked a deterioration in the quality and composition of employment. The Australian Bureau of Statistics reported that the total number of employed people actually fell by roughly 21,000 in November. The only reason the unemployment rate did not rise in response to this job shedding was a simultaneous decline in the participation rate, which fell from 66.8% to 66.7%.

The decline in participation is a critical indicator of discouraged workers exiting the labour force. When job seekers stop actively looking for work, they are no longer counted as unemployed, which artificially depresses the headline rate. This “hidden unemployment” suggests that the labour market is weaker than the 4.3% figure implies.

Full-time employment, which provides the income stability necessary for household consumption and debt servicing, plummeted by 56,500 positions in November. This loss was only partially offset by an increase of 35,200 part-time positions. This substitution of full-time roles for part-time roles is a classic defensive strategy by employers who are uncertain about the future economic outlook and unwilling to commit to permanent salary obligations.

The rise in the underemployment rate further corroborates the thesis of increasing slack. The underemployment rate, which measures employed persons who want and are available for more hours, rose to 6.2% in November. This metric is particularly sensitive to the cost-of-living crisis, as workers seek additional hours to cope with high inflation and interest rates.

A rising underemployment rate in an environment of falling real wages represents a significant squeeze on household welfare. When combined with the unemployment rate, the total labour force underutilisation rate pushed above 10.5% in late 2025, signalling that despite the “tight” rhetoric, there is a substantial reserve of unutilised labour capacity building up in the economy.

It is also important to consider the independent estimates provided by Roy Morgan (Australia’s oldest and most well-known independent market research company), which utilise a different methodology to the Australian Bureau of Statistics.

In September 2025, Roy Morgan estimated the “real” unemployment rate at 10.8%, with a combined unemployment and underemployment count involving 3.2 million Australians.

While the Australian Bureau of Statistics definition is the global standard for monetary policy formulation, the Roy Morgan figures highlight the lived experience of millions of Australians who feel the bite of a slowing economy more acutely than the official statistics suggest.

The discrepancy between these measures often widens during economic downturns, as the strict criteria for being “unemployed” (active search within the last four weeks and availability to start immediately) exclude those on the margins of the workforce.

Why prices refuse to budge

While the labour market is showing clear signs of cooling, the inflation landscape in Australia has remained stubbornly resistant to the dampening effects of monetary policy. Wages, prices, and productivity are feeding into each other, creating a cycle that keeps inflation higher than the Reserve Bank of Australia’s 2% to 3% goal. New data from late 2025 showed that inflation is still a serious problem and will need strict policies for a longer time.

In October 2025, inflation rose to 3.8%, up from 3.6% in September, with increases seen across many basic goods. The trimmed mean inflation, which is the Reserve Bank’s preferred measure of underlying price pressures, also moved higher to 3.3%. These figures confirmed that the disinflationary process had stalled and, in some areas, reversed.

Housing costs have emerged as the single largest contributor to this inflationary persistence. In October, housing inflation ran at 5.9%. This category is driven by two powerful forces that are largely immune to interest rate hikes in the short term. The first is the rental market, which is experiencing a severe crisis of supply. With vacancy rates at record lows and population growth continuing at a rapid pace, landlords have significant pricing power.

Rents have surged across all major capital cities, adding a heavy weight to the inflation basket. The second factor is the cost of new dwelling purchases, which remains elevated due to high construction costs. Labour shortages in the trades, combined with the high cost of materials, have kept the price of building new homes high even as demand for new approvals has softened.

The Wage Price Index for the September quarter rose by 0.8%, taking the annual growth rate to 3.4%. While this figure is below the peak seen in previous years, it remains high relative to the abysmal productivity performance of the Australian economy.

Productivity growth, which measures the output produced per hour worked, has been flat or negative for several quarters. When wages rise without a corresponding increase in productivity, the unit labour cost for businesses increases.

To maintain profit margins, businesses must pass these higher costs on to consumers in the form of higher prices. This wage-price dynamic is particularly evident in the service sector, where productivity gains are harder to achieve than in manufacturing or agriculture.

The divergence between public and private sector wage growth adds another layer of complexity. The 3.8% annual growth in public sector wages acts as a floor for wage expectations across the economy. State government enterprise agreements, particularly in the healthcare sector, have locked in wage increases that will sustain income growth for a large portion of the workforce.

While these increases are necessary to attract and retain essential workers, they also support aggregate household income and spending power. This fiscal impulse counteracts the monetary contraction sought by the Reserve Bank. Private sector wages, which grew at a more modest 3.2%, are showing signs of responding to the slowing economy, but the aggregate effect is diluted by the strength of the public sector.

The persistence of inflation has forced a recalibration of the “soft landing” narrative. The hope that inflation would glide effortlessly back to target while unemployment remained low has been replaced by the realisation that a more prolonged period of sub-trend growth and higher unemployment may be required to break the back of domestic price pressures.

The Reserve Bank’s revised forecasts in the November Statement on Monetary Policy projected that inflation would remain above the target band for “a while” and would not return to the midpoint until late 2027. This extension of the timeline reflects an admission that the embedded inflation expectations in the economy are harder to dislodge than previously thought.

While the Consumer Price Index measures the rate of change in prices, the accumulated level of prices remains permanently higher. The price of essential goods and services such as food, health, and housing has absorbed a significant portion of household budgets, leaving less room for discretionary spending.

This is evident in the GDP data, which showed a 0.2% decline in discretionary consumption in the September quarter. Households are prioritising survival spending over lifestyle spending, a shift that has ripple effects through the retail and hospitality sectors.

The island’s policy of isolation

The Reserve Bank of Australia has entered a phase of policy paralysis characterised by a high-wire act between a softening economy and sticky inflation. The decision by the board to leave the cash rate unchanged at 3.60% at its final meeting of 2025 was widely expected, yet it highlighted the unique and difficult position in which Australia finds itself relative to the rest of the developed world.

While other major central banks have commenced easing cycles to support growth, the Reserve Bank of Australia remains locked in a restrictive stance, with the threat of further hikes still lingering in its forward guidance.

The December decision was unanimous, but the accompanying statement revealed a hawkish tilt that surprised some market participants. Governor Michele Bullock made it unequivocally clear that “cuts were firmly off the table.” The contrast with the United States Federal Reserve is particularly stark.

In December 2025, the Federal Reserve cut its benchmark interest rate by 25 basis points to a target range of 3.50 to 3.75%. This marked the third consecutive rate cut by the US central bank, driven by a cooling labour market where unemployment had risen to 4.4% and a greater confidence that inflation was on a sustainable path to target. The European Central Bank (ECB) and the Bank of England (BoE) have also moved to lower rates, responding to weaker growth profiles in their respective economies.

This divergence in monetary policy trajectories has significant implications for the Australian economy, particularly through the exchange rate channel. Typically, when the Reserve Bank of Australia holds rates steady while the US Federal Reserve cuts the interest rate, the differential shifts in favour of the Australian dollar.

A stronger Australian dollar makes imports cheaper, which provides a disinflationary impulse for tradable goods such as electronics, fuel, and vehicles. However, the Reserve Bank cannot rely on this mechanism to solve its inflation problem because the current inflation basket is dominated by non-tradable items like housing and services, which are largely insensitive to exchange rate movements.

The banking sector has responded to this new reality by revising its interest rate forecasts for 2026. The consensus among the “Big Four” banks has fractured. Commonwealth Bank, National Australia Bank, and ANZ have all shifted their views to predict an extended pause throughout 2026. These institutions now believe that the cash rate will remain at 3.60% for the foreseeable future, acting as a constant drag on the economy until inflation is decisively defeated.

In contrast, Westpac remains an outlier, forecasting two rate cuts in 2026, tentatively scheduled for May and August. Westpac’s economists argue that the current spike in inflation is driven by temporary anomalies that will wash out of the data, allowing the Reserve Bank to pivot mid-year to support growth.

Financial markets have taken an even more aggressive view, with interest rate swaps pricing in a significant probability of a rate hike by June 2026. This reflects the anxiety that inflation may have become structurally embedded at a level above 3%, which would require a second round of tightening to dislodge.

A return to rate hikes would be politically explosive and economically damaging given the fragility of the household sector, but the Reserve Bank has consistently stated that it will do “whatever is necessary” to return inflation to target.

The impact of this “higher for longer” regime is evident in the flow of credit and investment. While business investment has remained surprisingly resilient, rising 3.4% in the September 2025 quarter due to spending on data centres and digital infrastructure, household credit growth has slowed.

The “mortgage cliff,” which referred to the transition of borrowers from low fixed rates to high variable rates, has now evolved into a “mortgage plateau.” Borrowers have absorbed the shock of higher payments, but they have done so by slashing discretionary spending and drawing down on savings buffers. The prospect of no rate relief in 2026 means that this financial stress will be prolonged, increasing the risk of mortgage arrears and defaults as savings pools are eventually exhausted.

The Reserve Bank’s strategy relies on the assumption that the labour market will remain “healthy” enough to absorb this prolonged period of restriction. The forecast that the unemployment rate will stabilise around 4.5% allows the bank to prioritise inflation fighting. However, as the September spike demonstrated, labour market dynamics can shift rapidly.

If the unemployment rate were to accelerate toward 5.0%, the Reserve Bank would face a much sharper dilemma involving a choice between abandoning its inflation target or accepting a recession. For now, the board judges that the risks to inflation are greater than the employment risks, but this calculus will be tested in the coming months as the full lag effects of monetary policy continue to work their way through the economy.

Should the unemployment rate be held below 4.7% while inflation slowly moderates, the economy may achieve the elusive “soft landing.” This would involve a period of below-trend growth but no catastrophic collapse. However, the risks are tilted to the downside.

If the September unemployment spike was not an anomaly but a leading indicator of a sharper deterioration, the Reserve Bank may be forced to pivot rapidly. A sudden jump in unemployment would likely shatter consumer confidence and trigger a rapid deleveraging cycle in the housing market.

The post Australia’s ‘soft landing’ at risk appeared first on International Finance.