At the start of this year, global trade growth was expected to accelerate amid cautious optimism and global economic stability. However, the optimistic atmosphere suddenly shifted as the new U.S. administration began implementing a bold policy agenda, resulting in far-reaching consequences for the global macroeconomic environment.

On April 2nd, known as “Liberation Day,” U.S. President Donald Trump announced comprehensive tariffs, including a minimum 10% duty on all imports and higher rates on selected countries. Trade forecasts then sharply deteriorated due to concerns over major supply chain disruptions, rising uncertainty, and the potential escalation of trade wars. At that time, the World Trade Organization predicted a contraction in trade for the year, according to a report by the QNB economic team.

Over the past forty years, real trade volumes only contracted under exceptional circumstances, such as in 2009 following the global financial crisis, and in 2020 due to the major disruptions caused by the COVID-19 pandemic.

However, expectations changed since April, and the global economy once again demonstrated strong resilience. According to the QNB economic team, although global trade growth in 2025 will be modest by historical standards, it will avoid the more pessimistic scenarios by a wide margin. This article analyzes three key factors supporting our positive outlook on global trade.

First: Leading Indicators Show Strong Global Trade Performance

Leading indicators point to strong global trade performance. Export activity in highly integrated Asian economies such as Japan, South Korea, Singapore, Taiwan, Thailand, and Vietnam provides useful real-time trade outlook statistics. After these indicators recorded an average annual growth rate of 6% in dollar value during 2024, consistent with a global trade recovery that year, this measure accelerated, doubling to an average of 12% in the past four months and has so far been little affected by trade tensions. Similarly, despite significant uncertainty, Chinese exports have grown at an average annual rate of 6% in recent months.

Investor expectations regarding future profits of companies in the transportation sector also provide signals about global trade prospects. The Dow Jones Transportation Index is a U.S. stock index composed of companies operating in aviation, trucking, maritime shipping, railroads, and delivery services, whose performance anticipates trends related to global export dynamics.

After reaching its lowest levels in mid-2024 on an annual growth basis, this index returned to positive territory indicating trade expansion… This signals a decline in pessimism even amid sharp trade shocks. While a gap remains between rising Asian exports and modest profit expectations in the Dow Jones Transportation Index, this can be explained by proactive shipping of exports to the U.S. amid repeated threats of tariff increases. In other words, although strong growth in Asian exports may be temporary, profit expectations still indicate moderate expansion rather than a sharp trade decline.

Second: Rising U.S. Protectionism May Not Trigger Global Trade Wars

The increase in U.S. protectionism may not lead to widespread global trade wars as previously feared. The U.S. administration concluded an initial round of negotiations, reflecting a shift toward a more pragmatic and realistic approach, which helped reduce uncertainty and avoid highly negative scenarios. Major industries benefited from broad exemptions, with agreements reached with the United Kingdom, Japan, Indonesia, Vietnam, the Philippines, the European Union, and others. This reduced the scope of potential tariff rates for the rest of the world. Moreover, while protectionism is rising in the U.S., the rest of the world is gradually moving in the opposite direction. From the European Union to Asia and Latin America, most major economies still consider trade a fundamental element of their growth models and actively seek to enhance integration through new trade agreements or strengthening existing ones.

As the world adapts to rising U.S. protectionism, international initiatives excluding the U.S. and efforts to avoid trade wars mitigate negative expectations about global trade policies.

Third: Interest Rate Cuts by Major Central Banks Will Support International Trade

Interest rate cut cycles by major central banks will provide additional support for international trade. In the U.S., with increasing macroeconomic risks impacting economic slowdown, the Federal Reserve is expected to cut the main interest rate by 125 basis points over the next year, reaching 3.25% by the end of 2026, lowering credit costs from restrictive to more accommodative levels. In the Eurozone, inflation has been controlled, and the European Central Bank has cut its main interest rate by 200 basis points since mid-2024 to 2%. Interest rate levels significantly affect international trade due to their impact on corporate investments and household demand for goods, two key elements in trade flows. Since the U.S. and Eurozone represent about 40% of the global economy, the monetary easing cycle in advanced economies will help boost global trade growth.

Overall, despite the significant expected slowdown in global trade growth, the outlook for 2025 has improved compared to the most pessimistic scenarios following the “Liberation Day” tariff announcement. Positive economic indicators, supportive monetary policies, and trade truces help reduce negative impacts on the trade environment.