Global trade’s rollercoaster ride

Global trade has proved resilient amid rising protectionism and geopolitical tension, leavened by regional integration and new trade agreements.

After decades of steady expansion that powered global growth and lifted millions out of poverty, the system underpinning cross-border trade has come under strain. Even before the eruption of trade tensions between major economies earlier this year, trade-restrictive measures had reached unprecedented levels. Today, the combination of pandemic-era supply-chain disruptions, resurgent protectionism, and intensifying geopolitical tensions has created a far more uncertain environment for global trade.

Yet trade growth has proved remarkably resilient so far this year. At the same time, many countries have recognised the need for deeper integration and have launched new trade agreements — particularly among emerging-market and developing economies (EMDEs), which continue to pursue a more active role in shaping the future of global trade.
 

Rising restrictions

A decade-long accumulation of restrictions has been supercharged by sharp tariff hikes and retaliatory measures among major economies in recent months. As a result, both tariffs and uncertainty remain far above historical norms. According to Global Trade Alert, the number of new trade restrictions reached record highs during 2023–25, reversing decades of gradual liberalisation.

In the first ten months of 2025 alone, more than 2,500 trade restrictions were imposed worldwide — almost five times as many as during the same period in 2015 (Figure 1). Although some of these measures have since been rolled back and new negotiations are underway, businesses continue to navigate choppy waters marked by heightened policy uncertainty, stretched supply chains, and the ever-present threat of additional barriers. Global trade policy uncertainty so far in the 2020s has averaged nearly five times the level of the 2000s.

The multilateral trading system itself is under severe strain. The World Trade Organization’s dispute-settlement mechanism remains paralysed, and progress toward broader reform has slowed. The appetite for deep trade agreements has withered: only about six agreements per year have been signed in the 2020–24 period, less than half the pace of the 2000s, while the appetite for restrictions appears insatiable (Figure 2).

These developments have unfolded against a backdrop of growing public discontent. Globalisation is now widely thought to have distributed its benefits unevenly and enabled unfair practices. Such perceptions have fuelled a backlash that has weakened political support for open trade and amplified uncertainty. Unsurprisingly, prolonged trade weakness has coincided with a pronounced slowdown in investment.

Resilient trade

Nevertheless, global trade has shown surprising resilience this year. In 2025, global goods trade volumes expanded at an average monthly rate of 4.7% through August, a notable acceleration from 2.7% in 2024 and a sharp rebound from a 0.7% contraction in 2023 (Figure 3). Goods trade has avoided the sharp contraction that many had feared earlier in the year.

Firms have adapted supply chains to take advantage of existing trade preferences and have built up inventories to manage uncertainty, limiting the pass-through of higher costs to consumers. Services trade — largely insulated from the latest increases in trade costs — has also remained robust, particularly in business and information services.

Even so, leading indicators point to a loss of momentum in global trade. Surveys of new export orders indicate softening external demand, as the temporary boost from front-loaded imports ahead of tariff hikes in April and August begins to fade. The Purchasing Managers’ Index for global manufacturing shows that new export orders slipped back into contractionary territory in April, following a brief rebound in March 2025.
 

Developing economies: More integrated, more exposed

EMDEs today are far more integrated into global trade than they were at the start of the 21st century. Over the past decade, they have accounted for nearly 40% of global trade, up from 25% in the early 2000s. Between 2000 and 2024, world trade in goods and services nearly quadrupled, with EMDEs contributing over 40% of that increase.

Perhaps most notably, EMDEs now trade increasingly with one another. As of 2024, about 60% export more to other EMDEs than to advanced economies — up from 28% in 2000. Their goods exports to fellow EMDEs have consistently outpaced those to advanced economies. These deepening linkages within EMDEs have become a central pillar of the global trading system.
 

Renewed momentum in trade agreements

For the first time in the 2020s, momentum returned this year to bilateral and regional negotiations. More than a dozen agreements were signed, with the total likely to rise by December, roughly double the average annual number recorded during 2020–24 and above the average of the 2010s. Governments are seeking to diversify partners, strengthen regional supply chains, and reduce vulnerability to global fragmentation.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) continues to expand, attracting new members and applications. The African Continental Free Trade Area (AfCFTA), which took effect in 2019 with 22 signatories, has since expanded to include 55 countries, making it the world’s largest free-trade area by number of participants. Its goal is ambitious: to create a single continental market for goods and services.

Meanwhile, the European Union has signed agreements with Mercosur, Mexico, and Indonesia and advanced negotiations with India; European Free Trade Area countries have concluded new agreements with several emerging markets; China and the Association of Southeast Asian Nations (ASEAN) have upgraded their free trade agreement; and the United States has pursued selective deals designed to rebalance relationships and restore confidence among key partners.

The motivation behind this renewed momentum is clear. As global value chains are reconfigured, preferential trade agreements can help secure market access, enhance competitiveness, and attract investment. Indeed, trade among members of regional agreements has proved more resilient than trade outside them.

Still, challenges remain. Some agreements have not yet been ratified, and implementation lags have slowed tangible progress. Overlapping commitments and complex rules of origin can limit the effective use of preferences, creating a ‘spaghetti bowl’ of trade rules. The proliferation of divergent standards also risks further fragmenting the multilateral system. Yet, the renewed drive toward regional integration underscores a key reality: countries are not retreating from trade — they are adapting to a changing global landscape.
 

Policy priorities for EMDEs

In this uncertain environment, EMDEs need to pursue policies that sustain integration and enhance resilience. Four priorities stand out.

Embrace integration: Rather than resorting to tit-for-tat protectionism, EMDEs should deepen cooperation with willing partners. Recent regional initiatives demonstrate what is possible. If fully implemented, AfCFTA measures to facilitate trade and FDI could boost Africa’s exports by more than 30% and double intra-regional exports by 2035. Similarly, in the Asia-Pacific area, lower trade costs and liberalised rules of origin under the Regional Comprehensive Economic Partnership (RCEP) could increase trade among its 15 members by 12% and raise real incomes by 2.5% by 2035. Deep trade agreements — those that tackle behind-the-border barriers as well as tariffs — generate larger gains.

Reduce trade costs and improve domestic conditions: Non-tariff trade costs, in the form of red tape, logistical, and other difficulties, remain stubbornly high in EMDEs: equivalent to tariffs about 50 percentage points higher than they are in advanced economies. Investments in transport, ports, and digital infrastructure can narrow these gaps. Efficiency-raising reforms in customs procedures, logistics, and regulatory compliance can deliver quick wins. Lower trade costs translate directly into greater competitiveness and higher real incomes.

Employ industrial policy strategically and diversify: Industrial policy is making a comeback, but EMDEs need to deploy it judiciously. Interventions should be targeted, transparent, time-bound, and aligned with WTO rules. When well-designed, they can catalyse learning, foster innovation, and create jobs without distorting markets. Policy should also reflect the rapid expansion of services trade, particularly in digital, business, and information services.

Between 2005 and 2023, the value of services trade more than tripled (Figure 4). To seize these opportunities, EMDEs must invest in human capital and digital infrastructure, ensuring that workers have the skills demanded by a services-driven economy.

Support a rules-based multilateral system: EMDEs have a stake in revitalising a predictable, rules-based multilateral trading system. Reductions in trade costs linked to WTO-related reforms between 1995 and 2020 boosted global GDP by nearly 7%, and by over 30% in low-income countries. Multilateral institutions continue to foster dialogue to mitigate uncertainty surrounding trade and investment policies.
 

A vital engine, still in motion

For decades, international trade has been a powerful engine of progress in EMDEs, driving output and productivity growth, reducing poverty, and enabling economies to climb the value chain. It has also catalysed knowledge diffusion and deeper integration into global production networks.

The global trading system has been on a rollercoaster in recent years, disrupted by protectionism, pandemic shocks, and geopolitical rifts. The environment may no longer be as conducive to traditional export-led growth as it once was. Yet trade has proven remarkably resilient. New agreements are being forged, value chains reconfigured, and trade policy recalibrated to better reflect today’s risks and realities.

Even amid these shifts, the benefits of trade openness remain unmistakable. For EMDEs, sustained engagement with global trade is not just a development strategy — it is a necessity. By investing in competitiveness, strengthening regional and global ties, and maintaining open and predictable regimes, they can turn today’s volatile landscape into a foundation for lasting economic growth.

This blog is a repost from the Berne Union Yearbook, first published on December 9, 2025