Economic and Trade Uncertainties Testing Resiliency of Nordic Businesses

2025 was expected to mark a recovery for Nordic economies, but global market uncertainty, driven by evolving US trade tariffs, has stalled growth.

Protectionist measures are reshaping international trade, exposing Nordic businesses to economic headwinds and market volatility. For instance, Sweden's Ministry of Finance predicts a 0.15-0.4 percent dip in overall GDP due to export slumps¹. The evolving interplay between global economic policies and regional business strategies highlights the critical need for adaptability to remain resilient in an unpredictable market.

Contributing factors

The following factors are contributing to the current economic and trade uncertainties facing Nordic businesses:

Lingering economic downturn and inflation: While some sectors are still navigating the financial recovery from the post-COVID economic fallout, the added pressure of inflation has posed further challenges. According to a recent report, the risk of insolvency in Sweden is still rising in several sectors, including hospitality, manufacturing and construction². However, with inflation showing signs of stabilisation, these sectors may find opportunities to accelerate their recovery.
Rising material costs and resource scarcity: The manufacturing, construction and technology sectors are feeling the pressure of higher input costs, which are further intensified by global economic uncertainty and shifting trade policies.
Tariffs and trade uncertainty: The rise of tariff-based protectionism is a major contributor to market volatility. US tariffs on steel, aluminum and automobiles, and the potential for EU retaliatory measures are raising fresh concerns for the Nordic region's export-reliant industries. According to a Nordea Bank report, while the direct impact of tariffs on the Nordic economies remains sizable but manageable, the indirect impact — driven by reduced business confidence and heightened uncertainty — poses greater risks³.

"Unpredictable tariff policy creates significant uncertainty for the manufacturing sector. A tariff policy can shift dramatically between the time a price is offered and when a deal is finalised months later, making it difficult to plan and price effectively."

Paul Persson, Senior Insurance Broker, Manufacturing

Limited consumer spending: Global market volatility and economic shifts are driving cautious consumer spending and tighter household budgets. This has created an economic slowdown, particularly for sectors dependent on discretionary spending, such as retail and hospitality.
High cost of credit: Increasing credit costs are hindering businesses from investing and growing. Nordic businesses face pressure on their balance sheets, with some sectors struggling due to limited access to credit.

Impact on businesses

The factors discussed above have a significant and widespread impact on Nordic businesses, leading to:

Higher raw material costs, tariff pressures and financial tightening are pressuring the profit margin of businesses. The impact is already visible; a prominent Swedish car manufacturer recently announced 3,000 job cuts, citing pricing and tariff pressures as key reasons for lower profitability⁴.

This economic strain is also leading to a rise in business failures. In Norway, the construction sector has been hit particularly hard, with over 4,500 construction-related businesses going bankrupt in 2024.

Business insolvencies in Sweden and Finland hit record highs in 2024 (more than 10,000 cases in Sweden alone), with construction, retail and hospitality sectors struggling the most⁵.

Market uncertainty and volatile global trade dynamics are forcing businesses to delay expansion plans and adopt a more cautious approach to growth. Economic unpredictability is eroding business confidence, making long-term planning increasingly difficult.

Companies with high upfront investment needs are particularly vulnerable to these challenges. The higher cost of credit, driven by financial tightening and high interest rates, is further exacerbating the situation.

For export-oriented businesses, the uncertainty surrounding international trade agreements and potential retaliatory tariffs adds another layer of complexity, forcing them to reconsider expansion into foreign markets. This cautious stance is not only slowing growth but also impacting innovation and competitiveness, as companies prioritise short-term survival over long-term strategic investments.

Industries that were once key drivers of growth are now facing significant challenges that threaten their long-term viability. For instance, the downturn in Sweden's construction sector could lead to losses of up to SEK1,000 billion by 2030, and projects that are going ahead are facing the continued impact of inflation⁶.

Finland, on the other hand, was in recession, with high interest rates dampening demand and increasing cost pressures across industries. For example, the construction sector experienced a downturn as interest rates began to decrease in 2024. However, after two years of recession, Finland's economy is expected to grow by 1.0% in 2025 and 1.3% in 2026⁷.

Mitigation strategies

Businesses are increasingly adopting strategies to manage trade uncertainties, geopolitical tensions and economic instability — critical for maintaining operational continuity and sustaining a competitive edge.

Insurance as an essential tool

Businesses are increasingly adopting a layered approach to resilience, with a focus on comprehensive insurance coverage. Beyond traditional coverage, Directors and Officers (D&O) insurance is becoming increasingly vital, as financial struggles often lead to heightened scrutiny and legal actions against leadership. D&O insurance protects the personal assets of corporate directors and officers in the event of lawsuits alleging wrongful acts in their management capacity.

Diversify revenue streams and supply chain

Diversification is crucial for building resilience and ensuring stability. Instead of relying on a single source for supplies, distribution or revenue streams, businesses must broaden their options. This involves identifying alternative suppliers and fostering partnerships across multiple regions to ensure business continuity. Similarly, expanding into new markets and investing in new products or services diversifies revenue streams, making a business less vulnerable to shifts in economic conditions or changing consumer demands.

Cost-control measures

Economic downturns and inflationary pressures demand a renewed focus on cost-control strategies. Businesses need to identify areas where operational efficiencies can be improved, such as streamlining processes, renegotiating supplier contracts and optimising resource allocation. Investments in technology, such as predictive analytics and automation, can also play a key role in reducing costs while maintaining productivity.

Building resilience

Resilience planning is more than just immediate fixes; it requires businesses to build a robust foundation that can withstand future shocks. To weather the economic downturns and the ongoing volatility of the market, Nordic businesses should focus on preparing for long-term uncertainty. A key strategy for this is implementing scenario planning and flexible budgeting. By preparing for various potential outcomes and creating budgets that can be adjusted quickly, businesses can develop more resilient strategies, allowing them to adapt effectively to changing economic conditions and ensure continuity in times of crisis.

By embracing these comprehensive strategies, businesses in the Nordic region can better position themselves to navigate trade uncertainty and ensure long-term sustainability in an ever-evolving economic landscape.

"In a time of increased global uncertainty and economic unpredictability, it is more important than ever to safeguard against unforeseen events. A strong focus on cost control and adequate insurance solutions can assist business leaders during such times."

Dag Magne Torjussen, CFO Nordics