World Trade Resilient in 2025, Yet Tariffs Dim 2026 Outlook
Global Trade Hits 2.4% Growth in 2025, Dips to 0.5% in 2026
Geneva: Global merchandise trade has defied early headwinds in 2025, surging faster than anticipated in the first half of the year thanks to a rush of North American imports ahead of steep tariff hikes, a boom in demand for artificial intelligence hardware, and robust exchanges among emerging economies. The World Trade Organization (WTO), in its October 7 update to the “Global Trade Outlook and Statistics” report, has accordingly lifted its forecast for merchandise trade volume growth this year to 2.4 per cent – a sharp rebound from the 0.9 per cent projected in August. Yet the optimism is tempered: projections for 2026 have been halved to a meagre 0.5 per cent from 1.8 per cent, as the full weight of new U.S. tariffs – enacted in August under President Donald Trump’s administration – begins to ripple through supply chains, compounded by a cooling global economy. For the two-year span, the net effect remains modestly improved at 2.9 per cent, reflecting that some early inventory stockpiling of durable goods may cushion the blow without full reversal.
This resilience underscores the quiet power of diversified trade flows, particularly South-South commerce, which expanded by 8 per cent year-on-year in value terms through June – outpacing the global average of 6 per cent – with non-China partnerships clocking even stronger gains of about 9 per cent. WTO Director-General Ngozi Okonjo-Iweala hailed these trends as evidence of adaptability: “Countries’ measured response to tariff changes, the growth potential of AI, as well as increased trade among the rest of the world – particularly among emerging economies – helped ease trade setbacks in 2025.” She added a sobering note on the rules-based system that underpins such stability: “Trade resilience in 2025 is thanks in no small part to the stability provided by the rules-based multilateral trading system. Yet complacency is not an option. Today’s disruptions to the global trade system are a call to action for nations to reimagine trade and together lay a stronger foundation that delivers greater prosperity for people everywhere.”
The first half’s vigour was unmistakable. World merchandise trade volume, gauged by the average of exports and imports, climbed 4.9 per cent year-on-year, while its dollar value rose 6 per cent after a 2 per cent gain in 2024. North American importers, sensing impending duties on everything from electronics to machinery, accelerated purchases, swelling inventories across sectors like motor vehicles, lumber, construction gear, and non-durables – a classic frontloading tactic mirrored in purchasing managers’ indices and national data. Favourable tailwinds, including disinflation easing price pressures, expansionary fiscal measures, and vigorous expansion in emerging markets, further fueled demand. But the standout performer was AI: trade in related goods – semiconductors, servers, telecom equipment, even upstream inputs like raw silicon and speciality gases – accounted for nearly half the expansion, surging 20 per cent in value and underscoring Asia’s dominance in exporting these digital enablers amid a global investment frenzy. This tech-driven pulse not only propelled hardware but hinted at broader ripple effects, with WTO economists eyeing sustained AI trade as a potential medium-term uplift if regulatory hurdles like quantitative restrictions – which ballooned from 130 in 2012 to nearly 500 in 2024 – are eased. The 2025 World Trade Report, released in September, projects that bridging such gaps could amplify cross-border flows of goods and services by nearly 40 per cent by 2040, alongside 12-13 per cent GDP gains, positioning AI as a powerful enabler of inclusive growth if trade policies remain open and predictable.
Commercial services, less directly vulnerable to tariffs but intertwined with goods flows, tell a story of moderation. Export volume growth is now pegged to decelerate from 6.8 per cent in 2024 to 4.6 per cent this year and 4.4 per cent in 2026 – figures marginally firmer than April’s tariff-adjusted baseline but dimmer than a no-tariff scenario. The slowdown traces to transport (down to 2.5 per cent from 4.5 per cent) and travel (3.1 per cent from 11 per cent, as post-pandemic rebounds fade), though digitally delivered services buck the trend with 6.1 per cent growth versus 5.7 per cent last year. In 2026, transport faces further strain at 1.8 per cent, while travel edges up to 4.4 per cent and other services hold steady around 5 per cent. In contrast to goods, year-on-year growth in commercial services trade slowed to 5 per cent in the first quarter from 10 per cent in late 2024 but rebounded to 9 per cent in the second quarter based on preliminary data. Regionally, Europe leads 2025 services exports, trailed by Asia and the Middle East; come 2026, Asia and Africa may accelerate, but Europe and the Commonwealth of Independent States could falter. North America is projected to experience moderate growth this year, while South and Central America, the Caribbean, and Africa lag; in 2026, North America and those southern regions hold steady.
Looking ahead, the tariff overhang looms large. With duties now embedded, economists anticipate an unwind of frontloading as stockpiles deplete, input costs climb, and shipments slacken – potentially stoking inflation in exposed industries by late 2025. Global GDP growth is seen steadying at 2.7 per cent this year and dipping to 2.6 per cent in 2026, aligning with trade’s subdued trajectory. Regionally, Asia and Africa spearhead 2025 export volumes, with South and Central America, the Caribbean, and the Middle East posting modest gains; North America and the Commonwealth of Independent States, however, brace for declines. Imports paint a similar split: Africa and least-developed countries accelerate, while North America contracts. By 2026, export upticks are confined to North America, Europe, and the Commonwealth of Independent States, but imports weaken across the board. Least-developed countries, buoyed now with robust export gains, face softening trends ahead, underscoring their vulnerability to policy shocks, amplifying calls for policy safeguards.
The report also probes trade imbalances, dissecting how tariffs and macroeconomic levers – from fiscal stimulus to currency adjustments – shape surpluses and deficits, often amplifying vulnerabilities in an already fractured system. It examines the limits of trade policy in addressing such disparities, noting that while interventions like tariffs can influence balances, they risk broader distortions without complementary measures like structural reforms. Downside risks abound: the proliferation of restrictive measures and uncertainty could cascade beyond current flashpoints, eroding hard-won gains. On the brighter side, if AI’s momentum persists – perhaps bridging access gaps where bound tariffs hit 45 per cent in some low-income nations – it could inject vigour, potentially elevating trade by nearly 40 per cent by 2040 under optimal conditions. As Okonjo-Iweala implores, this juncture demands reinvention: not retreat into silos, but collective resolve to fortify a trading architecture that serves the many, not the few, in an era where innovation and isolation collide.
– global bihari bureau
