Trade and Growth: Strained Resilience
Geopolitical tensions, shifting trade relationships, and supply chain disruptions are reshaping global commerce and influencing how economies perform.
The trade shocks of 2025 created headwinds to global growth and stoked inflation concerns. Nonetheless, volumes were up nearly 5 percent last year, with trade in technology-related goods continuing to grow briskly (see In Focus on AI).
The structural shift in US trade policy in early 2025 accelerated the reorientation of trade, most notably in Asia. Many economies negotiated bilateral trade understandings with the US. Countries also pursued trade opportunities and agreements with each other and within regions, based on existing trade rules and systems. Their actions enabled trade to flow, but trade growth is expected to slow this year, exacerbated by the shock emanating from the war in the Middle East.
According to the International Energy Agency (IEA), the war—and subsequent closure of the Strait of Hormuz—caused the largest ever cut to global energy supplies. It has also led to knock-on effects on other commodities, food supplies, and broader supply chains whose macroeconomic implications the IMF is working closely with the IEA and World Bank to assess.
Enduring damage to energy export infrastructure in the region could continue to limit supply. Uncertainty and the need to build supply chains that are more resilient, but less efficient, still heavily influence trade and investment decisions. Recovery is also hampered by global trade barriers that remain much higher than they have been for decades.
Countries and regions are seeking to build resilience against these ongoing shocks by pursuing opportunities to diversify and deepen trade and sources of supply. As they do so, they can also address another pressing global risk: high external and domestic imbalances. IMF analysis shows how excessive imbalances increase vulnerability to economic shocks and financial instability, raising the risk of sudden sharp corrections.
To help members as they seek balanced trade, durable economic growth, and ongoing resilience, the IMF is providing tailored country and multilateral advice and encouraging countries to cooperate and scale back impediments to international commerce. Predictable, transparent, and well-communicated trade policy frameworks help reduce uncertainty and anchor business and consumer expectations.
The IMF has advised regions to be agile in looking for further opportunities to advance trade, including through multilateral and plurilateral negotiations.
The IMF is also providing deeper analysis of how to address today’s high global imbalances and their negative spillovers while stimulating growth. For example, in external surplus countries such as China, continued progress toward consumption-led growth can improve welfare and narrow trade and current account surpluses. For external deficit countries such as the US, credible fiscal consolidation could reduce demand for imports and external financing.
At the regional level, further integration within groups such as the Association of Southeast Asian Nations (ASEAN), and deepening the European Union’s single market and enacting reforms to stimulate private investment, will also support more resilient and sustainable growth.