Global trade starts 2025 on stable ground, but new risks loom: UNCTAD

In 2024, world trade saw record expansion to $33 trillion—up by 3.7 per cent year on year (YoY)—driven by developing economies and strong services trade.

The gap between developing and advanced economies is widening. Asia and Latin America remain key trade drivers, but 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, UNCTAD said in a release.

Nearshoring and friend-shoring 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, the UNCTAD report noted.

Trade dependence is also shifting. Economies like Russia, Vietnam and India have deepened trade ties with specific partners, while others, including Australia and the European Union (EU), are reducing reliance on traditional markets. The decline in trade concentration suggests that smaller economies are playing a bigger role.

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, particularly in advanced economies, is triggering retaliatory measures and adding trade barriers, UNCTAD observed.

Meanwhile, industrial policies are reshaping key sectors like clean energy, technology and critical raw materials, risking competition distortion.

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.

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, the report noted.

Trade in apparel and energy sectors 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.

As trade uncertainty grows, global cooperation and balanced policies remain critical. While China’s stimulus measures and lower inflation in some regions could support trade, protectionism and shifting policies in major economies remain key risks.

The challenge in 2025 is to prevent global fragmentation—where nations form isolated trade blocs, while managing policy shifts without undermining long-term growth, the report added.

Fibre2Fashion News Desk (DS)