KEY MESSAGES
- Global trade has undergone an extraordinary transformation over the past five decades. However, a succession of shocks has profoundly altered global trade dynamics, exposed vulnerabilities in supply chains, shifted policy priorities, and fuelled geopolitical frictions that now threaten the foundation of the rules-based trading system. Recent protectionist measures are leading to further tension and fragmentation of global markets and may lead to long-term structural shifts.
- Sub-Saharan Africa and parts of South-East Asia face the highest exposure to trade disruptions. The current trade landscape is especially challenging for least developed countries.
- The exploration of alternatives to the reliance on the US dollar for trade responds to concerns of many developing countries
but also introduces new risks and uncertainties. - The absence of a unified tax framework exacerbates challenges in mobilizing domestic revenue. Unilateral carbon taxation
measures are shifting the burden of climate change mitigation to producers in developing countries, particularly Africa,
without offering meaningful support for low-carbon industrial transitions. - The rapid rise of artificial intelligence (AI) is challenging long-standing intellectual property frameworks, disrupting traditional valuation models and raising fundamental concerns about how innovation is measured and protected.
- Addressing these challenges requires coordinated policy responses and a renewed commitment to multilateral cooperation to ensure inclusive economic growth. Without decisive intervention, trade disruptions could reinforce global inequalities and hinder economic development, particularly in regions that depend heavily on stable trade relationships.
Global trade has undergone an extraordinary transformation over the past five decades, propelled by structural shifts, technological advancements, and policy reforms that have progressively deepened economic integration. Since the establishment of the World Trade Organization (WTO) in 1995, the momentum of trade liberalization has accelerated, facilitating a period of exponential growth. Several factors have driven this expansion, including the rise of global manufacturing hubs, particularly in China and Southeast Asia, the super commodity cycle that fuelled resource-rich economies, and an unprecedented surge in services trade enabled by technological innovations.
China’s emergence as the world’s manufacturing powerhouse has redefined global trade patterns, serving as a critical link in supply chains across industries ranging from electronics to heavy machinery. China’s share of global manufacturing output rose from 3% in 1990 to nearly 30% by 2020, underscoring its central role in global production networks. Simultaneously, Southeast Asian nations such as Vietnam, Thailand, and Malaysia have integrated into the global supply network. Vietnam, for instance, saw its exports grow from $14 billion in 2000 to over $280 billion in 2020, reflecting its integration into global value chains.
The super commodity cycle, marked by soaring prices of oil, metals, and agricultural goods, provided resourcerich economies in Africa, Latin America, and the Middle East with substantial trade surpluses. For example, Brazil’s exports surged from $55 billion in 2000 to $280 billion in 2022, driven by commodities like soybeans and iron ore. The rapid digital transformation further catalysed trade in services, with fintech, cloud computing, and digital platforms breaking down barriers that had traditionally constrained cross-border transactions. The global market for digital services expanded from $1.2 trillion in 2005 to over $3.8 trillion in 2020, illustrating the sector’s rapid growth. Collectively, these forces have reshaped economic structures and deepened interdependence among nations.
However, the current trade landscape presents an increasingly complex and uncertain picture. A succession of shocks over the past 15 years—beginning with the 2008–09 financial crisis, followed by the COVID-19 pandemic and the war in Ukraine—has profoundly altered global trade dynamics. These crises have exposed vulnerabilities in supply chains, shifted policy priorities, and fuelled geopolitical frictions that now threaten the foundation of the rules-based trading system.
The war in Ukraine, for instance, exacerbated supply chain disruptions, particularly in energy and food markets, triggering inflationary pressures and prompting trade policy adjustments worldwide. Global energy prices spiked by over 50% in 2022 due to supply constraints, impacting production costs across various industries. Rising tensions between major economic powers, notably the United States, the European Union, and China, have created an environment of heightened uncertainty. Recent policy shifts in the United States have intensified these tensions, with escalating tariff measures and unilateral trade actions reshaping traditional alliances. The European Union has grown increasingly concerned about China’s dominance in high-tech sectors, particularly electric vehicles and renewable energy, leading to calls for policy adjustments. These disruptions represent the most significant reordering of global trade since the establishment of the WTO, marking the beginning of a new cycle in the world economy characterized by unilateral rule-setting as multilateral cooperation declines.
GEOPOLITICAL FACTORS
The United States has intensified its tariff measures since January 2025, leading to increased trade frictions. The recent escalation in tariff policies has affected key trading partners, causing ripple effects across global markets. The imposition of a 10% tariff on Chinese goods and 25% tariffs on steel, aluminum, and automotive imports from allies such as Canada, Mexico, and the European Union signals a more protectionist approach to trade. These measures have raised the average U.S. tariff rate from 2.5% in 2024 to an estimated 13.8% in 2025, marking the highest level since 1939. In response, China is preparing countermeasures targeting U.S. agricultural exports, including soybeans, meats, and grains, which could have severe repercussions for global trade and the economy.
Meanwhile, the European Union has introduced countervailing duties on certain Chinese exports, arguing that state subsidies distort competition. While these measures aim to protect domestic industries, they also risk further fragmentation of global markets. The BRICS initiative to introduce an alternative currency has generated concerns over shifts in global financial architecture, with the U.S. administration expressing opposition to moves that might weaken the dollar’s role in global trade.
These tensions influence investment flows and trade policies, requiring a reassessment of existing alliances and economic cooperation mechanisms. Developing countries, particularly Least Developed Countries (LDCs), find themselves caught in an increasingly complex web of trade restrictions, limiting their access to key export markets and raising the cost of imports essential for development.
LOGISTICS AND TRADE ROUTES
Sanctions against South Africa have increased the cost of alternative trade routes, impacting the viability of traditional shipping lanes. The recent debate over potential shifts in control over the Panama Canal has introduced uncertainties for global shippers, raising concerns about potential disruptions to one of the world’s most critical maritime corridors. The cost of shipping through alternative routes has increased by over 20% due to longer transit times and higher fuel expenses. Freight costs have surged by over 15% in certain regions, increasing trade costs and reducing supply chain efficiency. Rising costs are particularly evident in container shipping, where major carriers have introduced surcharges to mitigate risks associated with disrupted trade lanes.
Adding to these concerns, disruptions in the Red Sea due to regional conflicts have pushed insurers to raise premiums for ships transiting through the Bab el-Mandeb Strait. Many shipping firms have responded by rerouting vessels around the Cape of Good Hope, adding weeks to transit times and increasing costs. The knock-on effects of these rising logistics costs disproportionately impact developing economies, where higher transport prices hinder export competitiveness and slow industrialization efforts.
MARITIME SECURITY
The Suez Canal remains a vital artery of global commerce but continues to face security risks due to ongoing conflicts in Yemen and regional instability. Attacks on commercial vessels have heightened security risks, contributing to soaring maritime insurance premiums, which have risen by over 25% for ships passing through highrisk areas. Beyond the Suez Canal, piracy concerns have resurfaced in key shipping zones, particularly beyond the Gulf of Guinea, disrupting traditional trade routes. Insurance premiums for shipping in high-risk zones have risen by approximately 20% to 25% over the past year, reflecting the growing uncertainty in maritime trade. These developments have led to increased use of armed security personnel on vessels, further adding to operational costs.
The consequences for LDCs, especially those dependent on maritime trade, are profound, as security threats make imports more expensive and reduce the attractiveness of these economies for foreign investment.
First published as CDP Policy Brief 1, UN DESA, New York, March 2025