Global trade to grow 4% in 2026, slower than 4.4% in 2025: UNCTAD
Global trade is projected to grow by 4% in 2026, although slower than the previous year. The report indicates higher trade values resulting from energy price increases and export controls. Trade between China and the US has decreased significantly, while East Asia is expanding trade with both regions. Developing economies, particularly India, are expected to drive notable growth despite overall global economic slowdowns.
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Context
The (UNCTAD) released its Trade and Development Report, projecting a 4% growth in global trade for 2026, slightly lower than the 4.4% projected for 2025. This resilience in trade growth occurs despite geopolitical tensions and is largely driven by price increases rather than volume growth. The report highlights emerging structural issues like the concentration of AI trade and the increasing use of unilateral trade measures.
UPSC Perspectives
Economic
The report highlights a significant trend: global trade growth is currently being driven more by price increases (due to energy shocks and supply-chain constraints) rather than a genuine expansion in the volume of goods traded. This reflects structural vulnerabilities in the global economy. Furthermore, the report notes that advanced technology sectors, specifically AI hardware, are becoming the main drivers of merchandise trade. However, the benefits of this AI boom are highly concentrated, with 82% of value-added accruing to just four supplier segments. This technological concentration threatens to exacerbate existing inequalities between nations, a key concern for developing economies. Additionally, the report points to the trend of 'bifurcation' in developing world growth, where a few large economies like India (projected to grow fastest at 7.3%) drive expansion, while import-dependent nations struggle with rising debt and limited fiscal space.
Geopolitical
The report underscores the growing intersection of national security and economic policy, a concept often termed geoeconomics. Governments are increasingly employing industrial policies, export controls, and investment screening to achieve strategic objectives. This shift makes it harder for new entrants to access key sectors. A prime example is the shifting trade patterns: while US-China trade has declined by over 20%, East Asia has expanded trade with both. This indicates a restructuring of global supply chains, often referred to as friend-shoring or near-shoring, driven by geopolitical competition. The report also highlights that foreign direct investment (FDI) remains concentrated in developed regions (Europe and North America) and developing Asia, leaving many vulnerable economies marginalized. UPSC often explores how changing geopolitical dynamics impact global trade flows and investment patterns.
Governance
The findings point to a crisis in the multilateral trading system. The report notes that issues are advancing faster than multilateral rule-making (like within the ), pushing governments toward unilateral measures and plurilateral agreements. The expiration of preference schemes (like the or GSP) and the rise of unilateral tariffs disproportionately harm vulnerable exporters, particularly those dependent on single markets or facing high Most-Favored-Nation (MFN) tariffs. This trend undermines the rules-based international order and creates a fragmented trading environment. The failure of multilateral institutions to adapt quickly to new challenges, such as AI and climate change, is a critical area of focus for UPSC, especially concerning the role of organizations like the in ensuring fair trade for developing nations.