Geneva: The primary challenge for global trade in 2025 will be to avert the risk of global fragmentation, characterized by countries establishing isolated trade blocs. Concurrently, it will be essential to navigate policy changes in a manner that does not compromise sustained long-term growth.
The actions taken now by governments and businesses will shape trade resilience for years to come, according to the United Nations Trade and Development (UNCTAD). It warned that as trade uncertainty grows, global cooperation and balanced policies remain critical in 2025. While China’s stimulus measures and lower inflation in some regions could support trade, protectionism and shifting policies in major economies remain key risks.
“Global trade started 2025 on stable ground, but challenges are mounting,” the latest Global Trade Update by UNCTAD, covering data through early March, stated, signalling a shifting landscape.
The March 2025 edition explores the topic of tariffs and their impact on global trade. Currently, approximately two-thirds of international trade transpires without tariffs, primarily due to countries opting to lower duties under most-favoured-nation (MFN) provisions or through various trade agreements. Nevertheless, the tariff rates imposed on the remaining portion of international trade tend to be quite elevated, exhibiting considerable variation across different sectors. The agricultural sector continues to enjoy substantial protection, manufacturing faces trade obstacles in critical industries, whereas raw materials typically experience lower tariff rates.
Tariffs play a crucial role in trade policy, acting as a means to safeguard local industries while also contributing to government revenue. Nevertheless, elevated import duties may lead to increased expenses for both businesses and consumers, which could hinder economic expansion and reduce competitiveness, it warns.
In 2024, world trade saw record expansion to $33 trillion – up 3.7% from 2023 – driven by developing economies and strong services trade. Developing economies outpaced developed nations, with imports and exports rising 4% for the year and 2% in the fourth quarter, driven mainly by East and South Asia. Meanwhile, developed economies saw their trade stagnate for the year and drop by 2% in the last quarter.
But looking ahead, new risks loom, including trade imbalances, evolving policies, and geopolitical tensions.
The UNCTAD update mentioned the widening gap between developing and advanced economies, and said Asia and Latin America remain key trade drivers. But it pointed out that growth has slowed in many advanced economies. South-South trade is holding up, yet Africa’s intra-regional trade is shrinking, reversing gains. Meanwhile, trade between Europe and Central Asia has declined, reflecting shifting demand.
Supply chains diversify, not consolidate
Nearshoring and friendshoring trends reversed in 2024, as businesses moved beyond limiting trade to geopolitical allies or nearby regions. Instead of consolidating supply chains, firms are now diversifying trade networks across multiple regions to reduce risk – creating opportunities but adding complexity.
Also read: Goods trade policy uncertainty looms amidst tariff wars: WTO
Trade dependence is also shifting. Economies such as Russia, Vietnam, and India, have deepened trade ties with specific partners, while others, including Australia and the European Union, are reducing reliance on traditional markets. The decline in trade concentration suggests that smaller economies are playing a bigger role.
Trade policies redraw the map
Governments are expanding tariffs, subsidies, and industrial policies, reshaping trade flows. The United States, European Union (EU) and others are increasingly tying trade measures to economic security and climate goals, while China is using stimulus policies to maintain export momentum.
This policy realignment is contributing to uncertainty. Rising protectionism (policies favouring domestic industries through tariffs or restrictions), particularly in advanced economies, is triggering retaliatory measures (countermeasures from trading partners in response to trade restrictions) and adding trade barriers.
Meanwhile, industrial policies (long-term strategies to develop specific sectors) are reshaping key sectors like clean energy, technology and critical raw materials, risking competition distortion.
Global trade imbalances widen
In 2024, global trade imbalances returned to 2022 levels. The US trade deficit grew, China’s surplus expanded, while the EU shifted to surplus due to energy price changes.
Bilateral gaps persist: the US-China deficit is widening, the EU’s surplus with China is growing, and India’s deficit with Russia has increased amid shifting energy trade. These trends could prompt new tariffs, restrictions, or investment shifts, adding to economic uncertainty.
Uneven sector growth
Trade growth varied by industry: agri-food, communication tech, and transport saw gains, while energy, apparel, and extractives slowed due to weaker demand and policy shifts.
Shipping trends indicate a slowdown, with falling freight indices signaling weaker industrial activity, particularly in supply chain-dependent sectors.
Additionally, the report presents updated trade statistics and forecasts for various regions, industries, and sectors, encompassing the years 2024 and early 2025. Last year, global trade achieved an unprecedented total of $33 trillion; however, the future remains uncertain.
– global bihari bureau
