Geopolitics, economic headwinds, shifting supply chains, digital breakthroughs, and sustainability pushes are converging to challenge trade in 2026, according to the UNCTAD Global Trade Update.

These drivers are “redefining how countries engage in commerce”, said the intergovernmental body. For developing nations in particular, the implications look to be profound, as the traditional drivers of trade are replaced by more volatile and fragmented systems.

UNCTAD’s most immediate concern for the coming year is the persistence of sluggish global growth, which continues to moderate trade prospects and investment flows.

It estimates that global growth will remain “subdued at 2.6% in 2025 and 2026”, a figure that remains low despite the potential productivity gains offered by technologies such as artificial intelligence. This slowdown is hitting major economic engines simultaneously; the US is projected to grow by only 1.5% in 2026, while China, an “essential trade and investment partner for many developing countries”, is expected to see its expansion ease to 4.6%.

For developing economies excluding China, growth is expected to dip slightly to 4.2%, reflecting a “volatile external environment”. This deceleration has direct consequences for trade, manifesting through “weaker export demand, tighter financial conditions, and greater exposure to shocks”.

The report warned that “subdued global growth raises the stakes in developing countries by limiting investment and access to finance for infrastructure and industrialisation”. Commodity-dependent nations are particularly vulnerable, facing “heightened price volatility” while their access to necessary external finance becomes increasingly constrained.

Fundamental trade changes

Amid these headwinds, the structural pillars of global trade are being reshaped by geopolitical strains.

Global value chains are undergoing a reconfiguration as recent shocks have push companies “beyond cost-driven offshoring and towards risk-aware strategies”.

This shift, which is expected to intensify through 2026, is characterised by businesses “diversifying suppliers, ‘near-shoring’ production closer to consumers, and vertically integrating to secure key inputs”.

Technological advancements are further accelerating this trend, as “advances in automation and artificial intelligence are also reducing labour-cost advantages, encouraging production relocation”.

While these changes create new hubs and routes, they also introduce significant risks. Nearly two-thirds of global trade currently occurs within these value chains, and their reconfiguration is creating a divided landscape. “Countries with strong infrastructure, skilled labour, and stable long-term policies are better positioned to attract investment,” whereas “peripheral economies especially those reliant on low-cost labour exports risk marginalisation, UNCTAD said. It added that while supplier diversification can stabilise trade by strengthening resilience, it may also “introduce inefficiencies and weigh on trade growth”.

However, a major countervailing force is emerging in the form of a South-South trade surge. Developing countries are increasingly driving global export growth, with South-South trade appearing as a “major engine of global trade”. The scale of this shift is historic; between 1995 and 2025, South-South merchandise exports “soared from about $0.5 trillion to $6.8 trillion”, a pace that has far outstripped both South-North and overall world trade growth. Today, 57% of exports from developing countries are destined for other developing markets, a significant increase from just 38% three decades ago.

This trend is largely fuelled by regional value chains in Asia, but it is expanding globally. For instance, “more than half of Africa’s exports now go to other developing countries”, said UNCTAD, signalling deeper regional integration and the rising role of emerging economies as primary import markets. This shift may be further accelerated by geopolitical fragmentation, as “developing countries increasingly rely on each other to offset weaker demand in advanced economies”.

UNCTAD suggests that strengthening South–South linkages could become a key driver of resilience within global trade networks” particularly in underdeveloped corridors like those between Africa and Latin America.

Critical path

Finally, the report highlights the critical role of minerals in the emerging green economy, though this sector is currently facing significant destabilisation. Critical mineral markets entered 2026 following a sharp price correction; by late 2025, prices for minerals essential to clean energy technologies were “18–39% below peak levels”. This decline is attributed to “rapid supply expansion, slower-than-expected battery demand, and technological shifts that reduce mineral intensity”. While lower prices benefit producers of electric vehicles and renewable energy, they “risk discouraging new mining projects”.

Investment spending growth slowed to just 5% in 2024, compared with 30% in 2022.

Despite these lower prices, supply risks are intensifying due to government intervention.

Export controls and licensing regimes have become more stringent, with notable examples including the “Democratic Republic of the Congo’s cobalt export ban in February 2025” and “China’s controls on seven heavy rare earths”. UNCTAD warns that such measures can “tighten supply abruptly, even in a low-price environment”.

As import-dependent countries respond by stockpiling and forming bilateral agreements, the result is increasing supply-chain fragmentation and reducing efficiency in 2026. Ultimately, “resource security will remain a strategic trade issue”, UNCTAD warned, as competition over critical mineral supplies intensifies regardless of price moderations.
Source: Baltic Exchange