The global trade landscape underwent a significant transformation in the first quarter of this year, marking a resurgence after a rough period last year. This revival is underscored by a 1% increase in world merchandise trade, as reported by the World Trade Organization (WTO). The momentum behind this growth is largely attributed to the robust performance of developing nations and the high-tech sector, both of which have emerged as pivotal players in driving international commerce. However, this rebound is undermined by underlying concerns, such as escalating geopolitical tensions and the rise of trade protectionism, which pose potential threats to long-term trade recovery.

Developing countries have become the linchpin of this trade revival. The United Nations Conference on Trade and Development (UNCTAD) has indicated that the majority of global regions demonstrated positive imports and exports, mirroring the broader trade trends. Notably, East Asia and the Americas saw strong trading activities, with significant industrial powerhouses like China and India leading the charge. China's exports reportedly surged by 9%, placing it at the forefront among major global economies, while India followed with a commendable 7% increase. Conversely, regions like Africa, Oceania, South Asia, and West Asia experienced varying degrees of export declines. In line with the impressive trade performance of developing nations, South-South trade saw a 2% rise, primarily occurring within East Asia. Meanwhile, within the developed economies, the United States exhibited positive trade dynamics with a 3% increase in exports, contrasting with a lackluster performance in Europe where imports and exports continued their downward trajectory.

The high-tech sector has emerged as a critical engine for trade growth. There is a stark variance in growth rates among different categories of goods, particularly highlighting the compelling rise in trade for green energy technologies and artificial intelligence-related products. For instance, high-performance servers, crucial components for computational tasks, experienced a staggering over 25% increase in trade volume in the first quarter, significantly outpacing the sub-10% growth seen in other computing and storage hardware. This disparity illustrates the potent influence of new technological transformations on trade demand. Moreover, despite the backdrop of weakening demand in developed nations, the automotive sector demonstrated resilience by achieving a 13% year-on-year growth. This surge was primarily propelled by electric vehicles (EVs), which witnessed an exceptional 25% trade growth in the same quarter. According to UNCTAD's forecasts, the anticipation for electric vehicles, solar panels, batteries, and high-end semiconductors is set to rise, even amidst policy constraints from certain countries, suggesting that the trade growth for these commodities could well exceed average expectations.

Earlier in April, the WTO projected a 2.6% growth in global merchandise trade for this year, with an anticipated uptick to 3.3% next year. Following the release of first quarter data, the WTO affirmed that these figures align closely with its annual growth predictions, projecting a 2.7% year-on-year increase in trade if current trends persist.

While international organizations maintain a cautiously optimistic outlook for trade throughout the year, they acknowledge the transformative impacts of geopolitical factors and national industrial policies on global trade dynamics. These geopolitical factors have increasingly become prominent in shaping trade relationships and patterns. Since 2022, a noticeable strengthening of the correlation between trade and political alignments has emerged, particularly as bilateral trade increasingly gravitates toward politically allied nations. The concept of “friend-shoring,” which emphasizes nurturing supply chains within allied nations as opposed to politically neutral near-shoring, marks a shift in strategic trade considerations. Data indicates that several major economies with favorable bilateral relations with China have seen an increase in trade dependency over the past year, with countries like Russia, Brazil, and Vietnam rising by 5.8%, 3.3%, and 1.6% respectively.

Moreover, the role of industrial policy is profoundly reshaping international trade landscapes. In response to escalating geopolitical risks, the urgent shift toward green energy, and rapid technological advancements, major global economies are actively implementing interventions to bolster their competitiveness in strategic realms and improve resilience to crises. These governmental measures often manifest as industrial policies but carry substantial implications for international trade. Firstly, they can lead to a concentration of global supply for strategic products within a select group of countries equipped with robust subsidy capabilities, sidelining smaller economies from relevant trade markets. Secondly, such policies may exacerbate the fragmentation of international trade across different geopolitical blocs, especially if a “subsidy war” erupts, as primary suppliers compete fiercely for dominance in trade relations. This tension can greatly disrupt global value chains and market allocations, amplifying friction and conflicts between various economies and the multilateral trading system. Lastly, the intensification of trade protectionism can lead to increased costs and elevated risks of uncertainty as unilateral industrial policies provoke adversarial responses from trading partners, ultimately harming the rules-based international trading system.

The ongoing evolution of the global economy and the rapid shifts in international political landscapes are emerging as critical determinants of international trade. The green and intelligent transformations of economies have generated significant international demand for specific products, driving growth in merchandise trade. However, these transformations also compel leading nations to accelerate the development of their industrial sectors to strive for import substitution, posing obstacles to the sustainable development of international trade. Additionally, nations are reconstructing supply chains with their aligned partners, eroding the foundations of multilateralism, thus distorting the current international trade framework built on principles of free trade. This interplay among drivers of trade growth, resistance faced, and existing distortions suggests that while international trade may maintain growth in the short term, it will confront mounting downward pressures and distortion risks in the medium to long term.