UN reports slower growth in int’l trade for Q22025 amid headwinds

The growth of global trade has been positive in the first half of 2025 but faces mounting headwinds in the months ahead amid continued policy uncertainty and geopolitical tensions, according to a United Nations (UN) report. 

“On the negative side, global economic growth is expected to slow down in many regions, suggesting that international trade may face slower growth,” the Global Trade Update July 2025 released by UN Trade and Development (UNCTAD) said.

The report said the new United States tariffs –including a 10 percent baseline rate and additional duties on steel and aluminum– have raised the risk of trade fragmentation.     

“While the 10 percent rate is expected to remain, uncertainty is growing over potential pauses, exemptions, new broad-based tariffs targeting specific countries, and additional product-specific duties— such as those affecting the automotive sector,” it said.

The update cited other important factors contributing to heightened uncertainty in global trade, including the potential for retaliatory actions, growth in subsidies and inward-looking industrial policies, and ripple effects along global value chains.

“While retaliatory trade policy measures have been so far limited, a further increase in unilateral trade measures could trigger retaliation, leading to escalating trade tensions that can spill over to third-party countries not directly involved in the disputes,” it said.

The report said domestic-focused industrial strategies could intensify through 2025, with an increased use of domestic subsidies and trade-restrictive policies aimed at supporting national industries. 

“This is likely to weigh on international trade, especially in strategic and high-tech sectors,” it said. 

Further, the update said trade policy uncertainty targeting specific segments of global value chains affects not only the intended countries and sectors but also interconnected segments across the value chain. 

“Given today’s deeply integrated production systems, such measures can disrupt entire supply networks and drive substantial shifts,” it said.

Overall, trade growth has been positive in the first half of 2025, despite increasing trade policy uncertainty, ongoing geopolitical tensions, and a challenging global economic environment. Certain sectors and regions experienced stronger growth than others.

Global trade continued to expand at a slower rate in the first quarter of 2025 and likely rose further in the second quarter, potentially increasing by US$300 billion in the first half of the year.

The report said both goods and services trade have shown consistent growth over recent quarters, largely driven by the strong performance of developing countries. 

“While friendshoring trends remain above 2021 averages, recent quarters have shown a gradual increase in trade diversification. This shift is largely driven by reduced interdependence between China and the United States, as well as broader efforts to diversify supply chains and avoid over-reliance on single partners. Notably, nearshoring has declined in recent quarters, suggesting a renewed expansion of trade between geographically distant countries,” it added.