Tech beats tariffs: global trade growth accelerates and globalization sets new record

The DHL Globalization Tracker (formerly “DHL Global Connectedness Tracker”) aims to provide the most timely and comprehensive available resource for tracking global flows of trade, capital, information, and people. The online version features interactive charts with country- and region-level analysis, helping readers spot patterns relevant to their own countries and companies. The data updates for this edition were completed in September 2026 and cover developments up to mid-2026 for goods trade, greenfield foreign direct investment (FDI), and mergers & acquisitions (M&A) activity, as well as 2025 full-year results for most other types of international flows.

This edition of the Tracker focuses on four key questions: (1) Is global goods trade slowing amid policy shocks and conflict-related disruptions? (2) Is globalization reversing via shifts from international to domestic activity? (3) How is geopolitical rivalry reshaping international business patterns? (4) Are international flows becoming more regional? The latest results show globalization reaching a new high and trade growth accelerating, while major shifts in business patterns remain concentrated rather than global.

AI boosts trade growth

The race to build artificial intelligence (AI) infrastructure has become a major driver of trade growth. AI-enabling goods accounted for 42% of all goods trade growth in 2025, and this share rose to about 76% during the first quarter of 2026, according to WTO and OECD research. The value of global trade in these goods—including semiconductors and data transmission equipment—grew 22% in 2025 and accelerated to 42% year-on-year in the first quarter of 2026. Trade in critical minerals, batteries, and electric vehicles also expanded rapidly during the first quarter of 2026.

Trade volumes rise despite disruptions

Trade volume trends by region/country (Figure 2) highlight how global growth has persisted in the face of substantial turbulence. The Middle East and Africa region’s trade volumes fell sharply after the Iran war began in late February 2026. U.S. imports fell below prior-year levels in late 2025 after surging earlier in the year when buyers raced to get ahead of tariff increases. Yet these disruptions did not derail global trade growth. And China—the world’s largest exporter—grew its exports even faster than the global average, despite a sharp decline in its exports to the U.S. China’s export growth supported global trade growth but fueled concern about heightened competition in China’s other export markets.

Trade growth tug-of-war

Global trade is being pulled in opposing directions—and so far, the positive factors for trade growth have outweighed the negatives. The AI boom is firmly on the positive side: production of AI-related goods relies heavily on global value chains, boosting trade in raw materials and components, as well as final goods. Conflict-related disruptions pull in the other direction. Their trade effects have been severe, but concentrated, particularly in economies dependent on the Strait of Hormuz and in products such as oil/gas and fertilizers.

Trade policy is another negative force. Restrictions have increased rapidly and U.S. tariffs have reached their highest levels in decades. But here, too, the global impact is more limited than the dramatic nature of the policy changes might suggest. The U.S. share of world imports was only 13% in 2025, and roughly half of U.S. imports were exempted from tariff increases as of August 2026. Globally, 72% of goods trade is still conducted on most-favored-nation (MFN) terms (down from 80% in 2022).^[1]

This interplay of opposing forces is also highlighted by new OECD research showing that the share of foreign content in the exports of major economies increased from 2019 to 2024, despite shifts toward more domestic sourcing of inputs. The reasons for this surprising result are shifts in the mix of exported goods and services and changes in the production technologies employed. This underscores how economic and technological shifts can increase trade even as companies aim to boost sourcing from domestic suppliers.

Trade outlook stronger than before recent shocks

Despite the recent shocks to the international trade environment, the outlook for trade has actually improved. Strikingly, all four of the forecast sources we use to generate composite trade forecasts now call for faster trade growth through 2029 than they did before either the recent U.S. tariff increases or the 2026 Iran war.^[3] Figure 4 compares the current outlook with forecasts compiled in January 2025, before the U.S. tariff increases, and January 2026, before the Iran war.

The present outlook reflects a series of forecast upgrades since mid-2025. After the U.S. announced ‘Liberation Day’ tariffs in April 2025, trade forecasts were cut dramatically, with some sources predicting that global trade volumes would begin shrinking. The downgrades largely reflected fears that other countries would retaliate against U.S. tariffs, triggering a global trade war. Instead, most countries refrained from retaliation and many accelerated efforts to secure access to alternative markets through new trade agreements. Combined with the AI boom, this helped drive the subsequent trade forecast upgrades.

Trade growth to outpace past decade

Global trade volumes are forecast to grow at an annualized rate of 3.4% from 2026 to 2029, substantially faster than the 2.7% rate recorded over the prior decade (2016–25). However, trade growth is expected to slow from an unusually rapid 5.3% in 2025 to 4.6% in 2026 and 3.6% in 2027.

Middle East leads trade forecasts, North America leads upgrades

The fastest trade growth over the 2026–29 period is forecast in the Middle East & North Africa region, followed by South & Central Asia and East Asia & Pacific (see Figure 5). The Middle East & North Africa forecast is especially uncertain, due to the ongoing conflict in this region. The optimistic outlook for this region reflects expectations for a strong recovery after the eventual cessation of hostilities. The current forecast predicts a -4% decline in this region’s trade volume in 2026 followed by a 12% increase in 2027.

The largest upgrade to the trade growth forecasts since January 2026 was in North America, reversing much of the sharp downgrade that followed U.S. tariff increases in 2025. The large-scale AI buildout in the U.S. has fueled U.S. import growth, while imports of other goods have declined. One study estimates that without the AI investment boom, U.S. imports would have declined 10% in 2025 rather than increasing modestly. The second-largest upgrade was in East Asia & Pacific, supported by that region’s leading role in producing AI-enabling hardware.

Digital services outpacing overall trade growth

Trade in services is growing even faster than trade in physical goods, and AI is expected to continue providing an especially powerful boost to services trade. The fastest growth is in digitally delivered services (via online platforms, apps, etc.), which grew 10% in 2025 and now accounts for 55% of total services trade. WTO research predicts that AI could boost trade in digitally delivered services by 42% by 2040, exceeding the overall 34–37% boost predicted across goods and services trade.

Trade outlook still faces risks

The AI boom has been a major driver of recent trade growth, but that strength also creates a vulnerability. The concentration of trade growth in AI-related goods means that any slowdown or reversal in this sector could substantially reduce trade growth. Further escalation of military conflicts could also weaken the outlook, particularly if key trade routes or major trading economies are affected. Trade policy also remains unusually volatile. New trade barriers are a particular risk, as the U.S. continues to adjust its tariffs and other countries respond to increased imports from China.

Global trade is growing rapidly in absolute terms. But to assess whether globalization itself is advancing or receding, we also need to look at international activity in relative terms. The latest data show that the international share is growing.

Globalization depth reaches new record

The depth dimension of the DHL Global Connectedness Index measures international relative to domestic activity globally across 13 types of trade, capital, information, and people flows (see Figure 6). It reached a new record high of 25.8% in 2025,^[4] with the growth of international flows outpacing the growth of domestic activity across all four categories.

Capital and information flows recorded the largest increases in international relative to domestic activity in 2025. Trade recorded the smallest increase in depth—even though, as the previous section showed, trade itself showed robust absolute growth.

One quarter globalized

The new record of 25.8% strongly challenges the notion that globalization has gone into reverse. But it also highlights how limited globalization remains. We measure the depth of global connectedness on a scale from 0%—where no flows cross national borders—to 100%, where borders and distance cease to matter and no longer affect flows.^[5] At roughly 25%, the world remains far closer to a collection of separate national economies than to full global integration—even after decades of globalization.

Globalization also varies widely across flow categories: information flows are the most globalized, followed by capital and trade, while people flows remain the least globalized.

Companies show no retreat from foreign markets

Figure 7 reinforces this broader picture of resilience, showing international versus domestic activity across a variety of specific flows. About 20% of the value of all goods and services produced worldwide in 2025 was traded internationally, up slightly from 2024 and just below the record high of 22% set in 2008 (nearly matched again in 2022).^[6] Economic integration via trade thus remains close to record levels, even though roughly 80% of economic activity is still domestic.

International investment also remained resilient. Foreign direct investment (FDI) flows increased as a share of global fixed investment in 2025, while the value of announced greenfield FDI projects also rose slightly relative to world GDP. Large projects drove this resilience even as the number of greenfield FDI projects declined. AI investment played a major role: 40% of the value of greenfield FDI projects in 2025 was in the ICT/electronics sector. The share of M&A transactions crossing national borders has fallen modestly since spiking in 2022, but remains in line with historical norms.

Payments for the use of foreign intellectual property also continued to rise as a share of world GDP. Taken together, these trends show no retreat from any of the three main ways companies serve foreign markets: exporting (trade), investing in local operations (FDI), and licensing intellectual property to local partners.

Other measures published in the DHL Global Connectedness Report 2026 reinforce this picture. The report shows that multinational firms continue to earn near-record shares of their sales abroad and generate close to the highest recorded shares of global value-added, employment, and trade. Measures of international production via global value chains also remain resilient.

Travel recovers as scientific collaboration declines

Trends beyond business flows are more mixed. As seen in Figure 7, international scientific collaboration has declined since 2020 (measured based on the share of publications co-authored by researchers in multiple countries). But this does not reflect a broad retreat from cross-border research. The decline has instead been driven by growth in domestic scientific publications in China. Excluding China, the share of internationally coauthored scientific publications continues to rise.

International travel, meanwhile, continued its gradual recovery from the Covid-19 pandemic. The number of international trips per capita finally returned to its pre-Covid (2019) level in 2025. During the first quarter of 2026, international arrivals grew 2% globally (year-on-year), even as arrivals in the Middle East fell 14%.

Questions 1 and 2 tell a clear story: globalization is not in broad retreat. Global trade is growing strongly in absolute terms, while international activity has also gained relative to domestic activity. But resilience does not mean stasis. Global flows can remain strong even as their underlying patterns change. Question 3 examines shifts in who connects with whom from a geopolitical perspective. Question 4 then applies a geographic lens to assess whether international flows are becoming more regional.

Geopolitical rivalry is shifting international business patterns—but these changes are very uneven and smaller than many presume. Dramatic shifts are taking place between countries at the center of geopolitical tensions and policy shocks, especially the U.S. and China. At the global level, however, the evidence points to much more limited realignment.

Global trade patterns shift only modestly

Dramatic policy changes have drawn attention to resulting shifts in trade patterns. While it is important to pay careful attention to what is changing, it is also essential to recognize how much remains unchanged. Figure 8 puts recent trade pattern shifts into perspective by measuring how much countries’ trade shares with individual trade partners change from year to year. Globally, trade patterns changed only slightly more in 2025 than in an average year—and less than during the early stages of the Ukraine war in 2022 and 2023. The pace of change is above average, but remains within historical norms. Meanwhile, greenfield FDI and M&A patterns showed no unusually large changes in 2025.

U.S. import patterns shift dramatically

The U.S. tells a very different story. Figure 8 shows that U.S. imports shifted across source countries in 2025 more than twice as much as in an average year—and more than in any other year analyzed. The sharp contrast between the global and U.S. results points to a pattern that runs throughout this section: global flow patterns have changed relatively modestly, while countries at the center of geopolitical competition and policy shocks have experienced much larger shifts.

U.S.–China ties nearly halve

The most consequential shift in global flow patterns is the weakening of ties between the world’s two largest economies. Figure 9 compares the shares of U.S. and China flows involving each other in 2016 and 2026. On average, China’s share of U.S. trade, capital, information, and people flows has fallen by 48% since 2016, while the U.S. share of China’s flows has fallen by 44%. In other words, these economic giants have nearly halved the shares of their flows with each other over the past decade, with declines across almost all types of flows measured.

U.S. close allies maintain ties with China

Diminishing ties between the U.S. and China have not—at least yet—led to a wider bifurcation of the world economy into separate blocs of allied countries. U.S. close allies have largely maintained their ties with China. On average, the share of U.S. close allies’ flows involving China is down only 4%, while the share of China’s flows involving U.S. close allies is down 7%. There have even been notable increases in some areas: U.S. close allies have increased scientific collaboration with China and imports from China. (This analysis uses geopolitical classifications from Capital Economics. The U.S.–aligned bloc includes the U.S. and its “close allies,” including major European economies, Japan, Australia, and Canada.)

U.S. reliance on China: Reduction or redirection?

Figure 10 zooms in on the flow most in the crosshairs of U.S. policy interventions: U.S. imports from China. Viewed through direct trade alone, U.S. reliance on Chinese goods appears to have fallen dramatically. China’s share of U.S. imports peaked at 22% in 2017, before the U.S.–China trade war began, and had fallen to 14% by 2024. It plunged to just 9% in 2025 and continued declining to just 7% during the first five months of 2026. Meanwhile, China’s share of imports to the rest of the world has continued to increase, a contrast that makes the declines in the share of U.S. imports coming from China even more striking.

But direct imports tell only part of the story. U.S. imports from other countries contain rising amounts of materials and components made in China. As Figure 10 also shows, the share of “value added” from China in U.S. imports—including Chinese content embedded in goods imported from other countries—has fallen only slightly through 2024 (the most recent year with available data).^[7] This implies that a substantial share of U.S.–China interdependence via trade has been redirected through third countries rather than truly reduced.

Latest data show stronger U.S. imports from China

The latest monthly data add another qualification to the direct decoupling story. Most of the recent decline in China’s share of U.S. imports occurred between October 2024, immediately before President Trump’s re-election, and May 2025. This period included a brief escalation in which tariffs on U.S.–China trade rose above 100%, followed by a trade truce in May 2025. Since April 2026, China’s share of U.S. imports has increased modestly. This may reflect the narrowing gap between U.S. tariffs on Chinese goods and those on alternative suppliers after the U.S. Supreme Court ruled tariffs imposed under the International Emergency Economic Powers Act (IEEPA) unconstitutional.

U.S.–China decoupling ≠ global fragmentation

Figure 11 puts the recent decline in U.S.–China ties in global perspective by showing how international flows are distributed within and between geopolitical blocs. It distinguishes direct U.S.–China flows, flows between rival blocs, flows within each bloc, and flows involving countries aligned with neither superpower.^[8]

The share of global goods trade occurring directly between the U.S. and China has dropped from a peak of 3.5% in 2015 to 1.6% in 2026 (Jan–May)—a dramatic decline in U.S.–China trade, but a modest shift in global terms.^[9] Similarly,U.S.–China M&A deals accounted for just 0.2% of announced cross-border M&A in 2026 (Jan–Aug), down from 1.5% in 2016. The U.S.–China share of greenfield FDI projects has declined from a much earlier peak of 3.9% in 2005 to just 0.9% in 2026 (Jan–Jul). These small shares of total global business activity caution against equating U.S.–China decoupling with a broader fracturing of the world economy.

Most business already between friendly countries

The vast majority of international business already occurs within groups of close allies. In 2025, goods trade among close allies was three times larger than trade between rival blocs. The gap was even wider for investment: there were eight times more announced greenfield FDI projects and 19 times more M&A deals among close allies than between rival blocs. Because international business is already highly concentrated among friendly countries, de-risking exposure to geopolitical rivals may require smaller shifts in global flows than commonly assumed—even when individual bilateral relationships change dramatically.

Geopolitical realignment remains limited

Figure 12 provides another perspective on geopolitical shifts by taking into account differences between individual countries, even within groups of allies. It tracks the average “geopolitical distance” traversed by flows between all countries, based on the similarity of countries’ voting patterns in the UN General Assembly. A decline suggests that more activity is taking place between geopolitically aligned countries and less between rivals.

Looking first at all countries (yellow lines in Figure 12), goods trade has gradually shifted toward more geopolitically aligned partners since 2016, and this shift accelerated in 2023, following Russia’s full-scale invasion of Ukraine. This fragmentation, however, has advanced only modestly since 2023. Greenfield investment shows a different pattern: after a “friendshoring” trend from roughly 2011 to 2020, investment has since increasingly connected countries with different geopolitical alignments. M&A data, meanwhile, show a long-term trend toward deals between friendly countries, although this trend slowed in 2025.

Most of the recent fragmentation in global flows has been due to weaker U.S.–China ties and sanctions on Russia. When direct U.S.–China flows and all flows involving Russia are excluded (gray lines), the rest of the world’s goods trade has not shifted toward geopolitically closer partners since 2021 and the shift for M&A deals is 32% smaller.

In short, geopolitical rivalry is substantially reshaping some international relationships without yet producing a broad realignment of global flows.

In recent years, resilience imperatives, geopolitical tensions, regional trade agreements, automation, and environmental concerns have spurred interest in producing goods nearer to end customers—potentially signaling a shift from globalization to regionalization.^[10] Yet despite all the attention, there is still limited evidence of a broad shift toward more regionalized international flows—although the latest trade data may be starting to change that picture.

Tracking regionalization

We measure regionalization using two complementary indicators: (1) the share of flows occurring within major world regions and (2) the average distance over which international flows travel (see Figure 14). The first captures regionalization most directly, but its results depend partly on how countries are grouped into regions.^[11] Average distance provides a more objective view, since it does not require judgments about where to draw region boundaries. Since regional flows typically span shorter distances, we expect increases in regionalization to correspond with declining average flow distance.

Trade shows modest new signs of regionalization

For goods trade, the data through 2024 contradicted the notion of rising regionalization: trade flows consistently crossed longer distances, while the share happening within regions declined.^[12] The latest data, however, show a slight increase in regionalization in 2025, followed by a larger increase during the first five months of 2026. If this trend continues, predictions of an increase in trade regionalization will finally gain empirical support.

East Asia drives the regionalization shift in trade

Figure 15 shows that East Asia & Pacific was the main driver of increased trade regionalization during the first five months of 2026, perhaps reflecting intra-Asia supply chains boosted by the AI boom. The average distance for goods trade in the region declined by 201 km, while the intra-regional share rose from 57% to 60%.

North America moved in the opposite direction. Its average trade distance increased by 140 km during the first five months of 2026, while the intra-regional share remained stable. Trade between the U.S. and Canada declined, while U.S. trade increased with very distant partners such as Taiwan (China), Viet Nam, and Korea.

Patterns also varied widely at the country level. Among the 50 largest trading nations, changes in average trade distance ranged from an increase of 330 km in Brazil to a decrease of 330 km in Australia. China was also among the countries shifting most strongly toward shorter-distance trade (–184 km), while the U.S. moved substantially in the opposite direction (+114 km).

Investment does not follow the trade shift

Greenfield FDI projects, by contrast, continue to defy expectations of rising regionalization. The average distance between the home countries of investing companies and their investment destinations continued to increase in 2026 (Jan–Jul), although there was a small increase in the intra-regional share of greenfield FDI. Cross-border M&A activity, meanwhile, showed no substantial change in regionalization.

Regionalization is already the norm

While international flows are not consistently becoming more regional, they are already highly regionalized. On average, about half of global trade, capital, information, and people flows occur within roughly continent-sized regions—about three times more than would be expected if geographic distance and other cross-country differences did not influence flows. Most countries engage far more intensively with neighbors than with distant partners.

Selected bibliography

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Alfaro, L., & Chor, D. (2025). An anatomy of the great reallocation in US supply chain trade (Working Paper 34490; Working Paper Series). National Bureau of Economic Research. https://doi.org/10.3386/w34490

Altman, S. A., & Bastian, C. R. (2025). DHL Trade Atlas 2025: Mapping the shifting landscape of global trade. DHL Group. https://doi.org/10.58153/7xbtw-6s725

Altman, S. A., & Bastian, C. R. (2026). DHL Global Connectedness Report 2026: An in-depth analysis of the state of globalization. DHL Group. https://doi.org/10.58153/rm518-hve77

Altman, S. A., Bastian, C. R., & Fattedad, D. (2024). Challenging the deglobalization narrative: Global flows have remained resilient through successive shocks. Journal of International Business Policy, 7(4), 416–439. https://doi.org/10.1057/s42214-024-00197-0

Antràs, P., Kulesza, A., & Presbitero, A. (2026). The remains of the trade: The U.S.–China trade war and its aftermath. National Bureau of Economic Research; National Bureau of Economic Research. https://doi.org/10.3386/w35785

Asian Development Bank. (2025). ADB multiregional input-output tables. Database. https://kidb.adb.org/globalization/current

Blanga-Gubbay, M., & Rubı́nová, S. (2023). Is the global economy fragmenting? (WTO Staff Working Paper ERSD-2023-10). World Trade Organization (WTO). https://hdl.handle.net/10419/280428

Conte, M., Cotterlaz, P., & Mayer, T. (2022). The CEPII gravity database (Working Papers 2022-05). CEPII. https://www.cepii.fr/CEPII/en/publications/wp/abstract.asp?NoDoc=13432

Freund, C., Mattoo, A., Mulabdic, A., & Ruta, M. (2024). Is US trade policy reshaping global supply chains? Journal of International Economics, 152, 104011. https://doi.org/10.1016/j.jinteco.2024.104011

Gopinath, G., Gourinchas, P.-O., Presbitero, A. F., & Topalova, P. (2025). Changing global linkages: A new cold war? Journal of International Economics, 153, 104042. https://doi.org/10.1016/j.jinteco.2024.104042

OECD. (2026). Trends in global value chains. OECD Publishing. https://doi.org/10.1787/8217c2ff-en

Wang, X., Hyndman, R. J., Li, F., & Kang, Y. (2023). Forecast combinations: An over 50-year review. International Journal of Forecasting, 39(4), 1518–1547. https://doi.org/10.1016/j.ijforecast.2022.11.005

World Trade Organization. (2025). World trade report 2025: Making trade and AI work together to the benefit of all. World Trade Organization. https://www.wto.org/english/res_e/publications_e/wtr25_e.htm

  
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