Global trade growth is expected to slow later this year, weighed down by persistent trade tensions and rising trade costs, says UN Trade and Development (Unctad) in its 'Global Trade Update April 2026'.

The ongoing conflict in the Middle East and the shipping disruptions in the Strait of Hormuz are expected to intensify inflationary pressures on an already strained global economy facing geopolitical tensions, policy shifts and limited fiscal space – the room governments have to increase spending or cut taxes.

Although the US and Iran have confirmed that both have agreed to a two-week ceasefire and for shipping through the strait to resume to some extent, uncertainty remains over whether the war between the countries, which has affected most of the Middle East, will come to an end. It is also likely to take some time for shipping routes to return to normal, while the world is also dealing with the economic effects as a result of the war.

Rising energy prices, together with higher trade costs linked to tariffs, regulatory changes and the erosion of trade rules, further cloud the outlook, Unctad says.

The strong trade growth of 2025 appears to have carried into early 2026, with preliminary data from major economies and key indicators pointing to continued expansion in goods trade, although signs of a slowdown in services are emerging and this positive trend remains fragile.

However, strong global demand for AI-related goods, digital technologies and some green-industry products should remain strong and could help sustain trade’s overall performance.

This trend is already visible. The surge in AI- and ICT-related trade drove much of the manufacturing sector’s expansion in 2025 and is expected to remain an engine of growth in the coming quarters.

By contrast, energy trade remained volatile, and the automotive sector remained subdued amid rising protectionism.

Trade growth was widespread, but was stronger for developing economies in East Asia and Africa. South-South trade outpaced the global average, expanding by about 9% and underscoring the growing weight of developing economies on world trade.

Further, a persistent feature of recent trade dynamics is the sharp contraction in trade between the US and China, which fell by about one-quarter, or about $170-billion, in 2025.

Global trade has adapted, however, with several connector economies having emerged that act as intermediaries. Often serving as logistical hubs or assembly points, economies such as Cambodia, Egypt, Vietnam and Indonesia are helping to stabilise trade flows, support global growth and cushion the impact of increasing geopolitical fragmentation, Unctad says.