The World Trade Organization's director general says geopolitics and the wars in Ukraine and the Middle East will keep reshaping trade flows as companies hedge against future shocks. The WTO forecasts a 17% drop in exports this year, while it also raised its outlook for merchandise trade growth.
Wars in Ukraine and the Middle East, along with shifting geopolitics, will have a lasting impact on world trade flows, WTO Director General Ngozi Okonjo-Iweala told Reuters on Thursday. Companies are hedging their bets against future shocks, she said.
Middle East trade contracts
Trade contracted sharply in the Middle East as a result of the Iran war, despite a series of workarounds, and would take some time to bounce back, Okonjo-Iweala said. The WTO forecasts a 17% drop in exports this year, with imports down about 15%.
Private sector experts forecast a rebound once the war ends and the Strait of Hormuz is open, since it offers a cheaper route. However, repeated conflicts underscored the need for diversification, and some alternative routes would likely endure, she said.
Supply chains keep reconfiguring
Okonjo-Iweala expects broader diversification into different regions and countries to continue after repeated shocks from wars and other disruptions, including a wave of tariffs imposed by US President Donald Trump. According to Okonjo-Iweala: "There’s absolutely no doubt that supply chains have been reconfiguring." Business leaders found new trade routes, although they were more costly, she said.
Regional trade would also continue to expand, she said. Intra-African trade accounts for about 20% of African trade, while trade within the European Union accounts for about 60% of its trade.
AI demand lifts the WTO outlook
Last week the WTO upgraded its forecast for global merchandise trade growth, with demand for AI-related products helping offset disruption from the widening Middle East war. World merchandise trade volume growth is projected to reach 3.9% in 2026, up from 1.9% in the March baseline forecast.
Okonjo-Iweala said the outlook remains uncertain given the ongoing conflicts, tariffs and concerns that the AI boom could fizzle out or collapse.
Source: Investing.com
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