UNCTAD’s latest Trade and Development Report 2025 projects global growth will slow to 2.6% in 2025, down from 2.9% in 2024. Financial volatility and geopolitical uncertainty are putting pressure on trade and investment, reshaping the global economy.
How do financial markets influence global trade? The report reveals that shifts in finance move trade almost as much as real economic activity, affecting development worldwide.
Trade and Finance: An Interlinked System
Secretary-General Rebeca Grynspan emphasized that trade is not just a chain of suppliers, but also of credit lines, payment systems, and capital flows. More than 90% of global trade depends on bank finance, making trade highly sensitive to interest rates and investor sentiment.
Dollar liquidity and cross-border payment systems are crucial for international transactions, says UN Trade and Development’s new report‘ Trade and Development Report 2025: On the Brink – Trade, finance and the reshaping of the global economy’. Are developing economies at risk? Yes, as limited access to affordable credit makes them vulnerable to financial shocks.
Trade Trends and Structural Shifts
Global trade rose about 4% early in 2025, driven by firms accelerating imports before tariff changes and structural shifts such as the expansion of services and growth in South–South trade. Underlying trade growth is estimated at 2.5–3%, but is expected to ease further as financial conditions increasingly shape production and investment. Why are commodity markets changing? Over 75% of income for major food traders now comes from financial operations, not physical goods.
Developing Economies Face Mounting Pressures
Developing economies are forecast to grow by 4.3%, outpacing advanced economies, but they face higher financing costs, exposure to sudden capital shifts, and rising climate-related risks. These factors limit fiscal and investment space, slowing growth.
The global South accounts for over 40% of world output and half of global merchandise trade, yet only about 12% of global equity and 6% of bond markets. Why is borrowing more expensive? Many developing countries borrow at rates of 7–11%, compared to 1–4% in advanced economies.
Dollar Dominance and Climate Vulnerability
The dollar remains central to global finance, with its share in international payments rising to about 50%. The U.S. holds half of global equity and 40% of bond issuance. Climate-vulnerable countries pay higher interest—about $20 billion more annually—due to perceived risk.
Since 2006, these premiums have cost climate-vulnerable economies $212 billion, resources that could have supported social investment or adaptation.
Grynspan stressed that genuine resilience requires integrated policy frameworks recognizing the links between trade, finance, and sustainability. “We cannot understand trade isolated from finance,” she said, advocating coordinated reforms for long-term development
Policy Recommendations for Resilience
UNCTAD calls for reforms to restore stability and support development:
Fix multilateral trade dispute systems.
Update trade rules for services, digital trade, and climate action.
Close data gaps on trade and investment.
Reform the international monetary system to limit harmful swings.
Strengthen regional and domestic capital markets.
Use macroprudential tools to protect trade and investment.
Improve transparency in commodity trading and expand affordable trade finance.
