How Are Tariffs Rewriting Global Trade?

Why Trade Grew Despite Rising Tariffs

The World Trade Organization (WTO) Secretariat explains in Global Trade Outlook and Statistics, March 2026 how tariffs and geopolitical risks affected trade volumes, industrial distribution, and the forecast range. The report shows that global trade in 2025 presented the apparent paradox of rising tariffs alongside continued growth.

The WTO recorded a 4.6% increase in global merchandise trade volume in 2025, above its October 2025 forecast of 2.4%. Here, “trade volume” can be understood as how many goods the world actually transported after excluding price changes; the figure therefore reflects not only higher prices, but also more goods genuinely crossing borders.

The WTO did not explain this growth as evidence that tariffs had failed. The report argues that tariff expectations changed when companies placed orders, while demand for artificial intelligence-related equipment offset some weakness in traditional goods; total annual trade therefore grew, but the timing of growth, the industries involved, and the trade routes carrying it had already changed significantly.

Tariffs First Pulled Orders Forward

The WTO observed that North American importers stockpiled goods ahead of expected tariff increases, producing clear “front-loading” of trade in the first quarter of 2025. The term refers to companies completing future purchases early, much as retailers replenish inventory after learning that procurement costs are about to rise; the report shows that North American import growth slowed after higher tariffs took effect around midyear.

This timing mismatch lifted trade volumes early in the year but did not benefit every industry. The WTO found that US import growth in 2025 was concentrated in gold, pharmaceutical inputs, certain metals, and artificial intelligence-related goods, while non-artificial intelligence machinery, non-artificial intelligence electronics, and a broad range of products including automobiles, clothing, toys, plastics, and paper products weakened. The report considers the weakness in the second half of the year potentially reflective of the impact of higher tariffs.

The WTO’s explanation of 2025 is therefore that tariffs hurt total annual trade less than previously expected, but their effects had already entered the quarterly rhythm and industrial structure of trade. Early-year stockpiling created a one-off increase, while pressure on traditional consumer goods and intermediate goods became clearer after midyear; together, the two phases produced 4.6% growth for the full year.

Trade Is Shifting Toward Other Markets

Trade routes are also being adjusted. The WTO estimates that Asian economies contributed 71% of the increase in global merchandise trade volume in 2025, attributing this performance to the resilience of Asian exports, the expansion of artificial intelligence-related value chains, and some supply shifting toward faster-growing markets such as South America and Africa.

China’s export destinations provide a more specific example. WTO data show that China’s exports to the United States fell by approximately $105 billion in 2025, while exports to other destinations rose by approximately $301 billion; sales to ASEAN, Europe, Africa, and South America all increased. The report therefore concludes that weaker demand in the US market did not translate into an equivalent decline in China’s total exports. The shift reflects both rerouted trade and new demand from other regions.

The WTO also uses most-favoured-nation treatment to measure the fragmentation of trade rules. Most-favoured-nation treatment is the principle that members should generally grant other members the same tariff conditions; the report estimates that the share of world trade still conducted under this principle has fallen to 72%, linking the decline to frequent policy changes since 2025. The indicator records a shrinking coverage of common rules, but the WTO’s 72% estimate also shows that most trade still takes place within the multilateral framework.

Industrial Distribution Is Tilting Toward a Few High-Demand Areas

The WTO identifies investment in artificial intelligence hardware as an important support for trade growth in 2025. The report estimates that artificial intelligence-related spending accounted for about 70% of North American investment growth in the first three quarters of 2025; the import intensity of computer equipment and recent artificial intelligence investment reached 70% to 90%, while the import intensity of construction investment was below 2%. Import intensity indicates how much of each additional investment must be purchased from abroad, so investments of the same size in data centres and computing equipment generate more cross-border flows of goods.

This also explains why overall growth can conceal divergence across industries. Product data in the WTO report show that demand for artificial intelligence-related equipment supported trade in electronics and machinery, while imports of many traditional consumer goods and intermediate goods contracted at the same time. Citing UNCTAD forecasts, the report says that foreign direct investment in industries with high tariff exposure and deep participation in global value chains could fall by 25% in 2025, affecting industries such as textiles, electronics, and machinery.

Under the WTO’s analytical framework, tariffs influence where companies locate factories and supply chains, while artificial intelligence investment concentrates demand in semiconductors, servers, communications equipment, and software-related inputs. When both forces operate at once, global trade volume can still grow, but new trade becomes more dependent on a limited number of industries and regions.

Geopolitical Risks Are Widening the Forecast Range

The WTO’s original baseline scenario projected global merchandise trade volume growth of 1.9% in 2026. The report states that oil shipments through the Persian Gulf represented approximately 20% of global liquid petroleum consumption in 2024; if high energy prices caused by the conflict in the Middle East persist, merchandise trade growth in 2026 could fall to 1.4%, 0.5 percentage points below the baseline.

The transmission channel for services trade is different. Transport and tourism depend on shipping routes, airports, and the movement of people. The WTO’s baseline forecast is for global commercial services trade volume to grow by 4.8% in 2026; after incorporating the conflict in the Middle East and its economic effects, the adjusted scenario falls to 4.1%, a reduction of 0.7 percentage points.

The report also retains an upside scenario: if the conflict is brief and demand for artificial intelligence-related goods remains strong, artificial intelligence trade itself could add 0.5 percentage points to merchandise trade growth in 2026, bringing growth to 2.4%. The WTO also stresses that these conflict scenarios are estimates made under limited information and contain inherent uncertainty; they should not be treated as outcomes that have already occurred.

Tariffs Affect Procurement Timing, Trade Routes, and Industrial Distribution

According to the WTO, tariffs first change procurement timing: companies import ahead of potential rate increases, after which orders cool. They also change trade routes: as China’s exports to the United States decline, its exports to other markets increase, while Asia continues to provide the main contribution to growth. At the industrial level, artificial intelligence-related hardware remains strong, while imports of many non-artificial intelligence goods in the United States weaken.

The WTO’s 2026 baseline forecast further illustrates this divergence: Asian merchandise exports and imports are expected to grow by 3.5% and 3.3%, respectively; North American imports are expected to grow by only 0.3%, European exports by 0.5%, and Middle Eastern exports by 0.6%. These are forecasts based on specific economic and energy assumptions, not observed facts.

The WTO therefore concludes that tariffs are rearranging global trade without yet causing total trade volume to decline in the short term; geopolitical conflict is further widening the 2026 forecast range through energy, transport, and tourism. The final growth rate will still depend on the duration of the conflict, energy prices, and the intensity of artificial intelligence investment, none of which this report can determine in advance.

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Source institutions：World Trade Organization

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