What Are the Biggest Challenges for Global Trade?

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The United Nations Conference on Trade and Development (UNCTAD) recently released its latest Global Trade Update report, stating that the international trade landscape will become less clear in 2025. The rise of trade protectionism, particularly potential policy shifts in the United States, casts a shadow over the trade outlook for 2025. Geopolitical tensions, the digital revolution, and climate change are reshaping the trade-driven development landscape, potentially posing new challenges to future global economic integration while also bringing new opportunities. Global trends such as geopolitical competition, regional conflicts, and trade sanctions have impacted the stable foundation of global economic growth over the past 30 years, potentially leading to the fragmentation of the international trade system; the digital revolution may drag down the growth prospects of labor-intensive manufacturing-driven economies in low-income countries; and climate change may have a greater impact on all countries, especially low-income economies.

Five major factors contribute to the highly uncertain global trade outlook for 2025:

  1. Shifting US trade policy stance
The United States may adopt a more protectionist trade policy, imposing not only new tariffs on specific products but also broader implementation, impacting key trading partners, particularly those with high tariff barriers and large trade surpluses with the United States, such as China (approximately $280 billion in trade surplus with the United States), the European Union ($205 billion), Vietnam ($105 billion), and India ($45 billion).
  1. The ripple effect of trade controls
Unilateral implementation of highly restrictive trade policies by one country often provokes retaliation from other countries, leading to escalating trade barriers that could eventually involve third parties. Imposing tariffs on specific links in the global value chain can also create ripple effects, creating a more unpredictable global trade environment.
  1. Increased Subsidies and Trade Controls
In 2025, global industrial and trade policies will continue to be influenced by countries' priorities for national security and the urgency of fulfilling their climate commitments. Increased trade controls and policies supporting domestic sustainable and environmentally friendly products are expected to negatively impact international trade growth, particularly in strategic industries.
  1. The Impact of the US Dollar on Global Trade. Geopolitical tensions and shifting US policies may lead to a rise in the US dollar, but potential interest rate cuts by the Federal Reserve next year could also weaken the dollar. Since most commodities and cross-border trade are denominated in US dollars, uncertainty about the US dollar exchange rate also creates uncertainty for global trade.
  2. Declining Shipping Costs
Demand for container shipping declined in the second half of this year, as reflected in the sharp drop in the Shanghai Export Containerized Freight Index. While these indices indicate declining shipping costs, they also suggest weakening global demand for intermediate and processed goods.
As we all know, the much-anticipated "Trump 2.0 Era" has arrived, and this will be a significant factor influencing global foreign trade in 2025. With the series of measures Trump will implement upon taking office, it is certain that tariff barriers will gradually rise. This will also impact the global economic and trade landscape through other channels, such as investment, interest rates, and exchange rates, increasing volatility in the global trade market and making the overall foreign trade environment difficult to reverse.
In response, countries may introduce more protectionist measures, and mercantilism and regionalization will intensify.

WTO Calls and Forecasts
  • The Need to Reduce Trade Barriers
The WTO recently released a report revealing a series of bilateral and global trade measures taken by the United States since the beginning of the year. In response, many economies have announced trade facilitation measures, while others have also announced plans for retaliatory measures. The WTO recommends that countries reduce tariffs and trade barriers, strengthen the multilateral trading system, and promote trade liberalization and economic growth.
  • Global Trade Volume Forecast
The WTO urges countries to reduce tariffs and trade barriers and calls for collaborative solutions. Furthermore, the WTO's "World Trade Prospects and Statistics" report, released in April this year, predicts that global merchandise trade volume will decline by 0.2% in 2025, followed by a projected 2.5% growth in 2026. Despite strong global trade growth forecasts at the beginning of the year, actual forecasts have been adjusted due to changes in tariff policies and other geopolitical factors, and merchandise trade volumes are expected to decline slightly in 2025.

Some countermeasures:
1. Strengthen market research, actively and deeply understand the purchasing needs and competitive landscape of global target markets and buyers, and develop differentiated market strategies for different markets.
2. Increase investment in technological innovation, and within budget, strive to improve the technological content and added value of products to enhance product competitiveness.
3. Strengthen multi-channel promotion to increase exposure. Fully utilize Google, social media, trade shows, and other channels to increase product visibility, enhance brand awareness, and actively cooperate with partners in multiple fields to expand market reach.
4. Continuously and promptly monitor policy changes and proactively address trade risks.
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