GLOBAL trade has demonstrated unexpected resilience over the past year, outpacing initial projections despite a significant shift in US trade policy and the implementation of new tariff regimes, according to a report by Oxford Economics.
The analysis, released yesterday, reveals that while global exports surged in 2025, the drivers of this growth have shifted away from traditional US import demand toward complex trade rerouting and currency fluctuations.
A key finding of the report is the massive role of trade diversion in masking the impact of tariffs. Analysts estimate that trade rerouting — where goods, particularly from China, are sent through third-party countries like Vietnam before reaching the US — accounted for more than 20 per cent of Chinese exports in 2025.
“Trade diversion materially reduced effective US tariff burdens,” the report states, noting that this practice alone drove $1,455 billion of the rise in global trade growth last year.
This “double counting” of goods as they pass through intermediaries has kept trade statistics high even as direct trade corridors between major powers face increased friction.
The report identifies an “underappreciated tailwind” in the form of a weaker US dollar.
As the global trade system remains heavily dollar-dominated, the depreciation of the greenback has effectively cheapened dollar-invoiced goods, strengthening international trade linkages and offsetting some of the costs associated with new protectionist measures.
While overall US import demand trended below projections in late 2025, the first quarter of last year saw a significant spike driven by artificial intelligence related technology.
This frontloaded demand, combined with businesses rushing to import goods ahead of anticipated tariff hikes, provided a critical cushion for global exporters.
Looking ahead, Oxford Economics expects trade growth to cool from the highs of 2025 but maintains a medium-term outlook that remains above early-2025 expectations.
The report suggests that “capital-intensive” goods — such as high-end machinery and technology — are gaining a competitive edge in the international market over “labour-intensive” products, which are bearing the brunt of new tariff burdens.
As the global economy navigates these shifting policies, analysts conclude that the “comparative advantage” of advanced economies in producing high-value goods is becoming more pronounced, even in a more restrictive trade environment.
avinash@gdnmedia.bh
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