UNCTAD’s warning for 2026: Trade, power, and vulnerability

The United Nations (UN) has released its Global Trade Update, listing its projections for the top trends reshaping trade in 2026. 

The UN’s predictions are accompanied by a sense of warning, especially as geopolitical tensions and shifting trade corridors risk leaving economies on the margins of global trade out in the cold, with real-life implications for their residents.  

According to the report, 18,000 discriminatory trade measures have been implemented globally since 2020, driving the UN’s predictions that protectionist trade policies will crescendo, with adverse effects for developing economies.

Trade Finance Global (TFG) heard from Luz María de la Mora, Director of International Trade and Commodities at UN Trade and Development (UNCTAD), who outlined the recent developments in trade partnerships and how they respond to the increased fragmentation seen in global trade today.  

Changes in trade policy 

Economic growth and trade are expected to slow down in 2026. The UNCTAD anticipates this stagnation to remain at 2.6%, with both developing economies and major ones losing momentum. The US’ growth is projected at 1.5%, and China’s 4.6%. 

Slower growth is likely to decrease export demand, riskier for economies dependent on commodities, which may face price volatility. Commodity-dependent countries, those that make at least 60% of their export earnings through commodities, constitute a concerning 80% of developing markets.  

“Developing countries have been driving export growth through deeper integration into global value chains and commodity supply, particularly in East Asia,” said de la Mora. “However, this growth remains heavily dependent on external demand from major developed markets.”

The risk is particularly poignant for developing economies. Their infrastructure to absorb shocks to supply chains tends to be weaker, and their access to financing tends to be constrained. 

The UNCTAD also expects trade regulations to be tightened in 2026, driven by foreign policy ambitions. Powerful trade blocs have recently signed critical free trade agreements, such as the European Union’s (EU) new deal with India and the EU-Mercosur partnership. 

For de la Mora, recent partnerships “reflect long-standing efforts to deepen economic integration and diversify trade partnerships. In an increasingly fragmented and uncertain global economy, this context has helped renew momentum around such agreements as governments seek greater resilience and market diversification.”

However, 2026 could also see certain major players promoting their own standards elsewhere, implying a potential regulatory Brussels effect. 

The EU is infamous for its rigid regulations, and now, with the newly enforced Carbon Border Adjustment Mechanism (CBAM) – which places costs on emissions for imports entering the EU – it is likely to encourage its own norms for its trading partners as well, especially when it comes to carbon accounting. 

For the UNCTAD, this behaviour by dominant actors could “create rival regulatory blocks that force smaller countries to choose sides.” 

Tariffs, non-tariff measures, and political risk

Tariff-driven uncertainty dominated 2025. However, in the new year, collaborative efforts regarding environmental, social, and security causes could lead to the expansion of non-tariff measures (NTMs), including addressing trade imbalances, adjustments to supply chain reorganisation, and technological change within trade agreements. 

Yet, they also anticipate tariffs will continue being used as a strategic political tool. “Many countries, including in Latin America, use tariffs to shield domestic industries but also to advance non-trade objectives, for example, food security,” explained de la Mora. “The result is a more fragmented trade landscape, alongside higher barriers.”

Developing markets are particularly vulnerable, as revenue losses and financial hardship can stagnate their economic growth. As frequently argued, the impact of tariffs is often on consumer costs, which, in developing economies, can result in food insecurity and threats to people’s livelihoods – reflecting the tangible impact the political objectives of a few can have on many.

Amid this complex ecosystem, UNCTAD expects the World Trade Organization (WTO) to reach a turning point in 2026. They emphasise the importance of addressing the systemic barriers that disproportionately impact developing countries, and revisiting the dispute settlement mechanism (DSM), a formal WTO process for resolving disagreements. 

Within the WTO’s DSM, all member states can file disputes against one another, and both parties are brought before an independent judicial panel. However, in spite of the legal equality under the WTO-reckoning, economic inequality often results in powerful states leveraging their expansive industries and coercing smaller economies to refrain from retaliation. 

For UNCTAD, it’s crucial that the WTO reforms its DSM and sets up a functioning Appellate Body – the WTO’s 7-member dispute settlement tribunal that became obsolete in 2019, after US President Donald Trump prevented the appointment of new judges, effectively eliminating the rule of law from trade. The reestablishment of the WTO’s DSM is essential for safeguarding developing markets.  

UNCTAD also advocates for preserving special and differential treatment, which grants developing countries particular provisions, including longer time periods to implement agreements, measures to increase trading opportunities, and support to build infrastructure to implement technical standards. 

The rise of South-South links

According to the UNCTAD, almost two-thirds of trade corridors are being rewired due to geopolitical shifts. As unpredictability becomes standard, firms are diversifying their supply chains by seeking regionalisation. 

While this is contradicted by the EU’s recent ventures with India and Mercosur, the past year has seen a move towards regional integration – particularly in Asia, where the Association of Southeast Asian Nations (ASEAN) has replaced the EU as China’s top trading partner, making up 16.6% of Chinese foreign trade in early 2025.

The UNCTAD predicts South-South trade to accelerate in general as well, highlighting how South-South merchandise export grew from $0.5 trillion in 1995 to $6.8 trillion in 2025. 

As Western superpower US continues to rebrand itself as an aggressive trading partner, deeper economic ties between Global South countries is removing their dependency on exploitative trade relations with unreliable partners. 

“As global growth slows and financial conditions tighten, these dependencies may increase vulnerability,” emphasised de la Mora. “Weaker demand and reduced access to finance can disproportionately affect smaller producers, putting export earnings under pressure and raising risks to debt sustainability and the economic growth potential of developing countries.”

What’s being traded

In addition to changes in trade corridors and regulatory norms, what’s actually being traded is also experiencing a shift. What the UNCTAD refers to as the “servicification of trade” is expected to rise in 2026. Service exports are 27% of total global trade – a statistic that grew by about 9% in 2025. 

Environmental ambitions are also increasingly becoming a priority. In a study with international trade professionals, Thompson Reuters Institute’s 2024 report found that environmental, social, and governance (ESG) considerations are ranked as ‘important’ or ‘very important’ by 81% of participants. 

For the UNCTAD, climate change commitments are moving to the implementation stage, with 113 countries pledging to cut emissions 12% by 2035. The EU’s carbon-levy is also expected to make strides in the energy transition, with the anticipation that green technology markets could reach $640 billion per annum by 2030.

Critical minerals – central to recent global alliances – are integral for both clean energy technologies and defense capabilities. However, supply for them expanded before demand had the chance to catch up, meaning costs have eased while investment has weakened. This could lead to prices spiking in the future, posing new challenges for the energy transition. 

Agricultural trade is likely to remain crucial for food security. As commodity chains become increasingly impacted by tariffs, and food products make up almost 87% of food exports, safeguarding agriculture becomes a key priority. 

As seen in the recent India-EU deal, where agricultural products were deliberately handled with sensitivity, agricultural commodities need to be excluded from politicised trade objectives, for they are integral to human livelihoods. 

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UNCTAD’s 2026 Global Trade Update reads, not just as a list of predictions, but as a cautionary tale. As geopolitical objectives increasingly influence trade, regulations tighten, and commodities turn into chess pawns for politicians, the UNCTAD warns that developing economies may be those receiving the worst end of the stick. 

However, as de la Mora highlighted, South-South links are deepening, and emerging markets – whose growth through exports is unfortunately dependent on larger economies – are turning to one another instead. 

The UNCTAD’s Update reflects how these ties need to be strengthened, and non-tariff measures, as well as the safeguarding of commodities need to define global trade in 2026.