New Delhi: The World Trade Policy Uncertainty Index reached record levels in the first quarter of 2025, rising multi-fold from year-ago levels, the UN Trade and Development ( UNCTAD) said. Trade uncertainty is raising costs, unsettling financial markets and deepening divides between countries and disproportionately affecting low-income economies and small firms, it said in its Global Trade Update.
Trade policy uncertainty has become a major source of global economic instability in 2025, it said, adding that diversification of export markets and participation in trade agreements can help reduce this uncertainty.
“China’s recent trade patterns show the value of diversification,” UNCTAD said, adding that in the second quarter of 2025, Beijing’s exports to the world rose even as shipments to the US fell, showing how multiple markets can cushion the impact of unpredictable policies.
As per the Trade Update, policy changes in one country can send shockwaves across the globe, disrupting suppliers, manufacturers and markets and that as the world’s largest importer, even modest changes in American policies reshape supply chains and alter global trade flows.
Among the 15 countries mapped for exposure to US policy shifts via production networks, India is second least exposed after China on the UNCTAD’s Manufacturing intra-industry trade index.
Cautioning that uncertainty over when measures will apply often triggers pre-emptive reactions, it said that firms rush shipments before tariff deadlines, a practice known as “front-loading”, often switching to faster and more costly forms of transport.
“For example, air shipments to the US jumped nearly 10% the first quarter of 2025 compared to the same period a year before,” UNCTAD said.
Overall imports to the US surged in the first quarter as goods were front-loaded, then dropped sharply in the second quarter, once tariffs took hold – showing that uncertainty itself can be more disruptive than tariffs.
“Policy uncertainty is rarely accidental. Governments recalibrate trade rules in response to domestic pressures and sometimes use ambiguity to gain leverage in negotiations,” it said.
The trade policy uncertainty weighs on the global economy in three keyways: higher costs and slower growth, risks to financial stability as sudden shifts unsettle exchange rates and weaken investor confidence, capital flows and credit conditions, and third is erosion of trust as weaker rules and unilateral actions fuel retaliation, making global cooperation harder.
“For decades, multilateral and regional agreements discouraged abrupt shifts and stabilized flows, with uncertainty mostly limited to episodes like Brexit, Covid-19 or US–China trade tensions. But in 2025, with weakened rules and fierce competition for critical raw materials, uncertainty has soared to record levels,” it added.
The multilateral organisation noted that firms with multiple markets can redirect shipments when one closes, cushioning losses while countries with broader export bases offset downturns in one region with gains elsewhere. Similarly, trade agreements provide rules and dispute settlement mechanisms, which reduce shocks and encourage long-term investment.
Advance notice of policy changes, clear and data-driven trade measures, international coordination through UNCTAD, the World Trade Organization and others to avoid retaliatory cycles, stronger trade agreements and diversified export markets are the five ways to restore stability, strengthen resilience and predictability, it said.’
Trade policy uncertainty has become a major source of global economic instability in 2025, it said, adding that diversification of export markets and participation in trade agreements can help reduce this uncertainty.
“China’s recent trade patterns show the value of diversification,” UNCTAD said, adding that in the second quarter of 2025, Beijing’s exports to the world rose even as shipments to the US fell, showing how multiple markets can cushion the impact of unpredictable policies.
As per the Trade Update, policy changes in one country can send shockwaves across the globe, disrupting suppliers, manufacturers and markets and that as the world’s largest importer, even modest changes in American policies reshape supply chains and alter global trade flows.
Among the 15 countries mapped for exposure to US policy shifts via production networks, India is second least exposed after China on the UNCTAD’s Manufacturing intra-industry trade index.
Cautioning that uncertainty over when measures will apply often triggers pre-emptive reactions, it said that firms rush shipments before tariff deadlines, a practice known as “front-loading”, often switching to faster and more costly forms of transport.
“For example, air shipments to the US jumped nearly 10% the first quarter of 2025 compared to the same period a year before,” UNCTAD said.
Overall imports to the US surged in the first quarter as goods were front-loaded, then dropped sharply in the second quarter, once tariffs took hold – showing that uncertainty itself can be more disruptive than tariffs.
“Policy uncertainty is rarely accidental. Governments recalibrate trade rules in response to domestic pressures and sometimes use ambiguity to gain leverage in negotiations,” it said.
The trade policy uncertainty weighs on the global economy in three keyways: higher costs and slower growth, risks to financial stability as sudden shifts unsettle exchange rates and weaken investor confidence, capital flows and credit conditions, and third is erosion of trust as weaker rules and unilateral actions fuel retaliation, making global cooperation harder.
“For decades, multilateral and regional agreements discouraged abrupt shifts and stabilized flows, with uncertainty mostly limited to episodes like Brexit, Covid-19 or US–China trade tensions. But in 2025, with weakened rules and fierce competition for critical raw materials, uncertainty has soared to record levels,” it added.
The multilateral organisation noted that firms with multiple markets can redirect shipments when one closes, cushioning losses while countries with broader export bases offset downturns in one region with gains elsewhere. Similarly, trade agreements provide rules and dispute settlement mechanisms, which reduce shocks and encourage long-term investment.
Advance notice of policy changes, clear and data-driven trade measures, international coordination through UNCTAD, the World Trade Organization and others to avoid retaliatory cycles, stronger trade agreements and diversified export markets are the five ways to restore stability, strengthen resilience and predictability, it said.’
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