Global trade has demonstrated unexpected resilience amid a convergence of geopolitical crises, including the war in Ukraine, the recent conflict in Iran, and the return of Donald Trump to the US presidency with aggressive tariff policies. According to the World Trade Organization’s (WTO) annual report, goods trade volumes expanded by 4.6% last year, while services trade grew by 5.3%. However, economists caution that this growth is heavily skewed by demand for artificial intelligence infrastructure, potentially obscuring deeper structural weaknesses in the global trading system.
Robert Staiger, the WTO’s chief economist, described the current period as “the most serious and sustained disruptions since the world trading system was created 80 years ago.” The pandemic initially accelerated a shift away from China, the world’s largest manufacturer, while conflicts in Europe and the Middle East disrupted supplies of energy, food, and fertilizer. Meanwhile, Trump’s imposition of high duties—the highest in decades—has forced companies to urgently seek alternative suppliers and markets.
A significant driver of recent trade strength is the booming demand for high-tech components used in AI data centers. AI-related technology now accounts for approximately one-sixth of total goods trade and nearly half of global trade growth. However, Staiger noted that Asian nations largely dominate this AI goods trade, while Africa, Latin America, the Middle East, and much of Europe remain marginal participants. This concentration raises concerns that strong tech exports are masking declines in other sectors.
Since reclaiming the US presidency, Trump has further distanced American trade policy from WTO rules, which mandate equal treatment among member states. He has implemented country-specific duties and negotiated “reciprocal” tariffs, disrupting the principle of non-discrimination. Consequently, the share of global goods traded under core WTO terms has dropped to roughly 72%, down from approximately 80% in 2022.
The conflict in Ukraine has also fundamentally reshaped energy trade flows. The European Union has drastically reduced its reliance on Russian pipeline gas, dropping from 37% of imports in late 2021 to around 10%. EU imports of Russian oil and coal are now negligible. In response, the bloc has secured new energy partnerships with the United States, Norway, Australia, and Kazakhstan, replacing Russian pipeline gas with liquefied natural gas (LNG). Russia has redirected its energy exports, primarily to China and India, often at discounted rates.
When the Iran war began in late February, Tehran’s blockade of the Strait of Hormuz threatened a critical global energy chokepoint. The International Energy Agency reported that the world mitigated the shortfall through increased production from the US, Kazakhstan, Brazil, and Venezuela, as well as the release of roughly 300 million barrels from strategic reserves. Despite these adjustments, Brent crude has remained above $100 for much of the conflict, and analysts warn of potential supply tightness in the coming winter.
Trump’s tariffs have also triggered significant supply chain reconfigurations. US imports from China fell by about 28% last year, while imports from other nations, including Vietnam, Taiwan, and Mexico, rose by nearly 10%, reflecting efforts to diversify away from Chinese suppliers. Many multinationals have accelerated this trend by shifting production from China to Southeast Asia.
Experts debate whether the world is entering an era of deglobalization or simply experiencing a realignment of trade partners. Thomas Sampson, an associate professor at the London School of Economics, stated that while globalization has stalled, it remains unclear if the trend has reversed entirely. “It’s still an open question whether we’re actually at deglobalization or just shifting around who we trade with,” he said.
The future of the WTO remains uncertain. Alternatives to the current multilateral system include a continuation of Trump’s bilateral tariff approach, a network of free trade deals among blocs such as BRICS, or a coalition of EU, Japanese, Canadian, Australian, and Mexican nations adhering to WTO-style rules. Camille Reverdy of Bruegel suggested the EU prefers a reformed WTO to preserve its role as a leader in multilateral trade.
WTO economists project that further trade fragmentation along geopolitical lines could reduce global GDP by approximately 5% by 2050. In a scenario where the WTO is replaced by a patchwork of free-trade agreements, GDP could fall by up to 7%, with the smallest economies suffering the most. Conversely, reinforcing multilateral rules could boost global GDP by roughly 3%.
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