Global trade weathers Iran, Ukraine and Trump's tariffs

From the COVID-19 pandemic to Donald Trump's tariffs and ongoing conflicts in Ukraine and the Middle East, world trade policy has experienced the most unpredictable period since after World War II. The pandemic initially shut down factories and accelerated a shift away from China, which is the world's largest manufacturer. Subsequently, wars in Ukraine and the Middle East disrupted global supplies of oil, gas, food, and fertilizer.

US President Donald Trump's tariffs pushed US duties to their highest level in decades, forcing companies to seek new suppliers and markets.

Despite these challenges, global trade has remained surprisingly resilient. Goods trade volumes increased by 4.6% in 2023, driven by strong demand for AI technology. Services trade also grew by 5.3%. China remains the largest exporter of goods, while the United States is the largest importer. The European Union ranks second in both categories.

However, the WTO expressed concern that strong AI exports may be masking a drop in world trade that would otherwise occur. AI-related technology accounted for about one-sixth of goods trade but nearly half of global trade growth. Since the return of Trump to office last year, he has deviated from WTO rules on global trade, setting country-specific duties and negotiating individual exemptions and reciprocal tariffs.

Globalization has stalled, with WTO data showing that since around 2015, world trade has grown only as fast as the global economy. While the recent geopolitical upheavals have not yet reversed globalization, it remains uncertain whether the world is experiencing deglobalization or merely shifting trading partners. With Russia's full-scale invasion of Ukraine and Iran's blockade of the Strait of Hormuz, energy prices have risen significantly, causing concerns about potential supply shortages in the fall and winter.