From COVID to Donald Trump's tariffs — with wars in Ukraine and the Middle East in between — world trade policy is enduring the most unpredictable period of the postwar era. The pandemic shut factories worldwide and accelerated a shift away from China, the world’s largest manufacturer. The two conflicts then disrupted global supplies of oil and gas, food and fertilizer.
US President Donald Trump’s tariffs, meanwhile, pushed US duties to their highest level in decades, forcing firms to find new suppliers and markets. Robert Staiger, chief economist at the World Trade Organization (WTO), calls the turmoil "the most serious and sustained disruptions since the [world trading] system was created 80 years ago." Despite these shocks, global trade has remained surprisingly resilient. According to the WTO's annual report published last week, goods trade volumes rose 4.6% last year, lifted by strong demand for the advanced technology behind the artificial intelligence (AI) build-out.
Services trade volumes grew by 5.3%. China remained the world's largest goods exporter, while the United States was again the largest importer. The European Union came in second in both.
However, Staiger told news agency last week that strong AI exports "may be masking some of the drop in world trade that might otherwise be occurring." The WTO noted in its March trade outlook that Asian countries dominated the AI goods trade, while Africa, Latin America, the Middle East and much of Europe barely showed up. AI-related tech accounted for about one-sixth of goods trade but close to half of global trade growth. Since returning to office last year, Trump has continued to pivot from WTO rules on global trade.
The US president has set country-specific duties, breaking the WTO’s equal-treatment rule. He has since negotiated exemptions and "reciprocal" tariffs with individual countries. Despite this, globally, about 72% of goods are still traded on the Geneva-based agency's core terms, down from roughly 80% in 2022.
On a longer horizon, though, globalization appears to have stalled. WTO data shows that since about 2015, world trade has grown only as fast as the global economy. Despite the recent geopolitical upheavals, globalization has yet to shift into reverse.
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