Julio Herrera Velutini Analyzes Trade Wars Global Impact

April 2025 — Geneva. As geopolitical tensions rise and global trade becomes increasingly politicized, the financial world has been forced to re-evaluate its exposure to economic nationalism. Julio Herrera Velutini, an internationally recognized banking strategist and founder of Britannia Financial Group, believes trade wars are more than political chess—they’re financial earthquakes.

From Washington to Beijing, tariff threats and retaliatory measures have become tools of negotiation, but their financial fallout reaches much farther than diplomatic headlines suggest. According to Herrera Velutini, trade wars disrupt global investment patterns, increase volatility in capital markets, and place emerging economies in a vulnerable position.

“Trade wars don’t stop at borders. They alter capital flows, investor confidence, and currency valuations. The financial cost is often paid by those furthest from the negotiating table,” says Julio Herrera Velutini.

What Is a Trade War and Why It Affects Finance

Trade wars occur when countries impose tariffs or quotas on imports to protect domestic industries, often provoking retaliation. While the intention is to stimulate national growth, the outcome is usually a contraction in global trade volume, increased prices, and uncertain investment environments.

For the financial world, this manifests in several critical ways:

➤ Stock market volatility due to shifting corporate earnings projections.

➤ Currency instability as investors seek safer havens during policy uncertainty.

➤ Capital reallocation as businesses redirect supply chains and investment capital.

➤Slower global GDP growth, weakening demand for credit, lending, and foreign direct investment.

“Markets are allergic to uncertainty. And trade wars inject prolonged unpredictability into the system,” Herrera Velutini explains.

The U.S.–China Case Study: A Global Domino Effect

One of the most visible examples of a trade war’s financial impact was the U.S.–China trade conflict that escalated between 2018 and 2020, and whose effects still ripple through global economies.

Julio Herrera Velutini notes that during this period:

➤ The S&P 500 and Dow Jones experienced multiple dips, triggered by tariff announcements.

➤ Chinese capital outflows surged, as wealthy investors diversified assets into Europe and Singapore.

➤ Supply chains shifted out of China, leading to rising manufacturing costs and delays.

➤ Emerging market currencies like the Brazilian real and Indian rupee weakened due to reduced trade flows.

“The trade dispute between the world’s two largest economies exposed how deeply financial systems depend on open commerce,” Velutini says.

Impact on Emerging Markets: Collateral Damage

For emerging markets, trade wars pose existential threats. These nations often rely on commodity exports, outsourced manufacturing, and foreign direct investment to sustain growth. When global trade slows, they suffer disproportionately.

Julio Herrera Velutini points out three major ways trade wars harm these economies:

1. Reduced Foreign Direct Investment (FDI): Multinational corporations delay or cancel investment plans amid regulatory uncertainty.

2. Commodity Price Fluctuations: Tariffs and export bans reduce demand for raw materials, driving down prices.

3. Weaker Local Currencies: Investor flight from high-risk markets causes depreciation, raising debt repayment burdens.

“Trade wars rarely hurt the instigators the most. They hit emerging markets, which lack the buffers to withstand such shocks,” says Herrera Velutini.

Currency Volatility and Central Bank Dilemmas

Financial institutions in trade-sensitive economies often struggle to manage the ripple effects. Local central banks face intense pressure to stabilize currency values amid capital flight. Meanwhile, interest rates may need to be raised to control inflation—slowing growth further.

Velutini explains how this scenario played out in countries like Argentina and Turkey, where trade-related capital shifts caused debt servicing crises.

“The more trade wars destabilize currencies, the harder it is for governments to meet financial obligations. It becomes a spiral of tightening and austerity,” he explains.

Banking Sector Reactions: Shifts in Lending and Risk Strategy

Julio Herrera Velutini also warns that global banks and private equity firms are rebalancing their risk exposure in regions affected by trade disruptions.

During prolonged trade wars:

➤ Loan growth slows, particularly in manufacturing and trade-related sectors.

➤ Credit risk premiums increase, reflecting the added uncertainty.

➤ Asset diversification strategies change, with investors leaning toward domestic or “neutral” regions.

“Financial institutions follow trade. If trade slows, lending slows. That eventually means reduced access to capital for businesses and consumers alike,” Velutini notes.

Long-Term Consequences: Fragmented Financial Systems

In the long run, persistent trade wars could lead to a fragmentation of the global financial system, with countries pursuing alternative payment systems, trade blocs, and reserve currencies.

Julio Herrera Velutini believes the world is already moving in that direction:

➤ China’s Cross-Border Interbank Payment System (CIPS) seeks to rival SWIFT.

➤ Digital currency experiments by the BRICS nations aim to reduce dollar dependency.

➤ Regional trade agreements like the African Continental Free Trade Area (AfCFTA) are increasing intra-regional economic cooperation.

“When global systems feel exclusionary or politically risky, countries start building their own alternatives. That reshapes how finance operates,” says Velutini.

Solutions: What Policymakers and Financial Institutions Can Do

To mitigate the fallout from trade wars, Herrera Velutini calls for more proactive diplomacy and financial preparedness. He outlines five strategic recommendations:

1. Enhance International Trade Mediation Mechanisms

Strengthen organizations like the World Trade Organization to resolve disputes before escalation.

2. Promote Regional Economic Integration

Foster trade among neighboring countries to reduce reliance on global powers.

3. Develop Crisis-Responsive Financial Policies

Equip central banks with tools to cushion trade-induced currency shocks.

4. Invest in Trade Insurance and Risk Hedging

Encourage private financial institutions to expand trade finance products.

5. Support Technological Adaptation in Supply Chains

Help businesses build resilient and diversified networks that can pivot during disruptions.

Conclusion: Navigating a New Era of Financial Diplomacy

In a world where politics and economics are increasingly entwined, Julio Herrera Velutini advocates for a new paradigm—financial diplomacy, where economic relationships are managed with the same caution and care as foreign policy.

Trade wars may not involve armies or borders, but their consequences are just as real: weakened currencies, lost investments, and rising instability. Herrera Velutini’s voice, backed by two centuries of financial heritage and modern strategy, offers a clear warning and a practical path forward.

“Global prosperity requires global cooperation. And that means solving conflicts with agreements—not tariffs,” he concludes.