Global trade didn’t just survive “Liberation Day”; it came out stronger
|When Donald Trump ran and won in 2024 on a campaign to “make America Great Again” by building a tariff wall around the US, very few voices rose to defend free trade, outside of international organisations whose creed it is to defend it. After “Liberation Day”, economic forecasters braced themselves for a global trade war. But nothing of the sort happened. Instead, 2025 ended up being an all-time record year for trade liberalisation measures. 2026 is not even two-month-old and has already seen several giga-trade deals signed, two of which by India, one of the countries with the highest tariffs in the world, and there are more signs that the tide is turning. Yet, looking more closely, this is more than a pendulum shift: unlike in the earlier waves of trade liberalisation, the goal is not just “more trade” but “smarter trade”, preserving the gains and reducing the losses from earlier waves. This is good news for the global economy.
What happened to trade flows?
Trade flows bumped around quite a lot from quarter to quarter as importers tried to front-run ever changing tariffs and then run down bloated inventories. But as the data through year end come in, the picture that emerges is one of unmistakable resilience, indeed vigour.
Global trade grew by a whopping 18% in value over the first 11 months of the year (Chart1), and a decent 5.5% in volume, well above the grim WTO April forecast of a net contraction. The geography of the flows changed somewhat under the hood, with China’s exports to the US falling by nearly 20%, and exports to China from the US and Europe falling as well. But Europe saw a jump in intra-EU trade, and Asia ex-China a large increase in its exports to the US, partly reflecting re-rerouting of exports from China, but to a large extent also reflecting the boom in AI investment in the US, heavy in components imported from Asia.
Exports continued to grow in all regions
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