Geopolitics and the geometry of global trade: 2026 update

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In 2025, trade reconfigured rapidly and often in unexpected ways, as both short-term tariff shocks and deeper forces reshaped the system. The result was an uneven year, marked by solid trade growth and geopolitical realignment, sharp intra-year swings in US imports, record Chinese exports despite weakness in some major categories, Europe caught in a double squeeze, and new openings for parts of ASEAN and other emerging economies.

Multinationals recognize that trade is evolving rapidly and in hard-to-predict ways. What is often less clear, however, is how to navigate that uncertainty. The authors’ research over the past several years underscores the need for a practical posture: orienting trade strategy toward the structural waves most likely to endure, and building the capability to rebalance quickly as conditions shift.

Scenario analysis helps leaders treat trade exposure as a portfolio of safe bets, cautious bets, and uncertain bets—and to reallocate capital, capacity, and commercial focus accordingly.  In 2025, for example, trade corridors supported by underlying waves proved more resilient, including parts of intra-ASEAN trade and select Asia corridors such as India–Japan, while uncertain-bet corridors shrank on average, reflecting greater exposure to geopolitical rupture.

The signals do not stop at trade. The authors’ research on FDI announcements points to new capacity coming online in AI infrastructure and advanced manufacturing, and to new production hubs taking shape—particularly across the US–Asia technology stack and in selected emerging-market manufacturing locations.

AI-related trade emerged as the most substantial engine of growth. Exports of semiconductors and data-center equipment accounted for one-third of global trade growth as Asian hubs—Taiwan, South Korea, and parts of Southeast Asia—supplied markets around the world, particularly the United States.

China expanded its role as a “factory to the factories.” Increasing shipments to fast-growing emerging economies, it ramped up exports of industrial components and capital goods, supplying the essential machinery and parts needed to power advanced manufacturing hubs worldwide.

Tariffs triggered trade readjustment, with US–China trade falling by around 30 percent. The United States replaced about two-thirds of the gap with imports from other sellers, while Chinese exporters of consumer goods from electric cars to toys cut prices by an average of 8 percent to find buyers in new markets. ASEAN thrived, increasing trade with both economies, but the European Union faced a double squeeze: more Chinese imports and higher US tariffs.

Firms need to respond not only to long-term structural shifts but also manage short-term shocks and their effects. Tariff announcements—and the responses they triggered, from frontloading to redirection—illustrate the kind of rapid adjustments this demands. Doing so requires keeping a close pulse on trade developments and accelerating decision cycles—on everything from supply chain reorganization to broader strategic questions such as where to invest or which markets to serve.

The leaders who outperform will not choose between the long term and the short term. They will do both: positioning for enduring structural change while retaining the agility to respond to near-term disruptions—and continually rebalancing their corridor bets as the evidence evolves.

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