Global trade policy is enduring its most unpredictable period of the postwar era, battered by pandemic-era factory shutdowns, supply chain shocks from wars in Ukraine and the Middle East, and sweeping tariffs enacted by US President Donald Trump. Robert Staiger, chief economist at the World Trade Organization (WTO), called the turmoil the most serious and sustained disruptions since the global trading system was created 80 years ago.
Global Trade Volumes and AI Demand in 2025
Despite these overlapping shocks, goods trade volumes rose 4.6% last year, according to the WTO’s annual report published in March. This resilience was heavily lifted by strong demand for advanced technology supporting the artificial intelligence build-out. Services trade volumes grew by 5.3% over the same period. China maintained its position as the world’s largest goods exporter, while the United States remained the largest importer, with the European Union ranking second in both categories.
However, Staiger told AFP that strong AI exports may be masking a broader drop in world trade that might otherwise be occurring. WTO data from its March outlook indicates that Asian countries dominated the AI goods trade, whereas Africa, Latin America, the Middle East, and much of Europe barely registered. AI-related technology accounted for approximately one-sixth of goods trade but close to half of total global trade growth.
Washington Bypasses WTO Rules Amid Shifting Tariffs
Since returning to office, Trump has continued to pivot away from established WTO rules by establishing country-specific duties that break the organization’s equal-treatment mandate. The US president has negotiated exemptions and reciprocal tariffs with individual trading partners. Despite these unilateral actions, about 72% of goods globally are still traded under Geneva-based agency terms, down from roughly 80% in 2022.
Long-term metrics show that globalization has stalled rather than reversed. WTO figures indicate that since around 2015, world trade has grown only as fast as the global economy. Thomas Sampson, an associate professor at the London School of Economics, told DW that while the world is not becoming more globalized, it remains an open question whether true deglobalization is underway or if nations are simply shifting trading partners.
US imports from China fell by roughly 28% last year, according to the Peterson Institute for International Economics in Washington. Concurrently, US imports from the rest of world climbed by nearly a tenth, driven by rerouting efforts through suppliers in Vietnam, Taiwan, and Mexico to reduce reliance on Chinese manufacturing.
Energy Market Shifts Following Ukraine and Middle East Conflicts
Geopolitical conflicts have forced a rapid redrawing of global energy supply lines. Following Russia’s full-scale invasion of Ukraine in February 2022, the European Union slashed its reliance on Russian pipeline gas from 37% in late 2021 to around 10%, according to Eurostat. EU oil and coal imports from Russia are now negligible, replaced by new energy contracts with the US, Norway, Australia, and Kazakhstan utilizing liquefied natural gas.
Moscow redirected its energy exports to new buyers, notably China and India, which acquired Russian oil at steep discounts to global benchmarks. Camille Reverdy, an affiliate fellow at the Brussels-based think tank Bruegel, told DW she doubts the EU will rekindle energy trade with Moscow even after the war ends, noting that reliable alternative sources are firmly established.
Additional pressure hit energy markets when the Iran war began in late February, prompting Tehran to effectively close the Strait of Hormuz, a critical transit chokepoint. Saudi Arabia and the United Arab Emirates rerouted missing oil via pipeline to alternative ports. The International Energy Agency reported that global markets replaced missing barrels through increased production from the US, Kazakhstan, Brazil, and Venezuela, alongside the release of roughly 300 million barrels from strategic oil reserves noted by Reuters in August. Brent crude has traded above $100 for much of the conflict, prompting analyst warnings of tight supply heading into the fall and winter.
Alternative Futures for Multilateral Trade
Trump’s challenges to the WTO have sparked intense debate over what system might replace the Geneva-based agency if it is sidelined. Experts have floated several models, including permanent country-by-country tariffs, a sprawling web of free trade agreements across economic blocs like the BRICS nations, or a coalition proposed by Chatham House where the EU, Japan, Canada, Australia, and Mexico maintain WTO-style rules outside US and China participation.
Bruegel’s Reverdy stated that the EU prefers a reformed WTO to preserve its role as a leader in multilateral trade, noting Brussels has explored associate memberships for partners like Canada. Conversely, LSE’s Sampson warned that adopting Trump’s law-of-the-jungle approach would severely disadvantage smaller nations that rely on the WTO for a larger voice. Sampson added that trust in the US as a trading partner has collapsed and could take years to recover.
WTO economists modeled multiple future scenarios, projecting that further trade fragmentation along geopolitical lines could reduce global GDP by about 5% by 2050. In a worst-case scenario where the WTO vanishes entirely and is replaced by a patchwork of bilateral deals, global GDP could drop closer to 7%, hitting smaller and poorer economies the hardest. Conversely, reinforcing multilateral rules could lift global GDP by roughly 3%.
Goods trade growth and shifting US and EU supply chains
How did goods trade perform despite recent global shocks?
According to the WTO annual report, goods trade volumes rose 4.6% last year, driven largely by demand for advanced technology tied to the artificial intelligence build-out.
What impact have US tariffs had on trade patterns?
US imports from China fell by roughly 28% last year, while US imports from the rest of the world climbed by nearly 10% as firms rerouted supply chains through countries like Vietnam, Taiwan, and Mexico.
How did the European Union replace Russian energy supplies?
The EU cut its reliance on Russian pipeline gas from 37% in late 2021 to around 10%, replacing it with liquefied natural gas imports from the US, Norway, Australia, and Kazakhstan.
What are the projected economic impacts of trade fragmentation?
WTO econometric modeling indicates that severe trade fragmentation along geopolitical lines could reduce global GDP by about 5% by 2050, while a complete collapse of the WTO into isolated trade deals could reduce global GDP by close to 7%.
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