GENEVA, Switzerland – Global trade is being reshaped not just by tariffs or geopolitical tensions but also by policy unpredictability. The uncertainty is driving up costs, rattling markets and hitting developing economies hardest.
Global trade has always faced shocks, from tariffs to pandemics to geopolitical rifts. What is different now is that uncertainty itself has become systemic.
No longer tied to one-off events, policy unpredictability is increasingly built into the global economy, reshaping trade flows and slowing investment.
The latest Global Trade Update by UN Trade and Development (UNCTAD) shows how this climate of uncertainty is raising costs, unsettling financial markets and deepening divides between countries.
First, higher costs and slower growth
The World Trade Policy Uncertainty Index reached record levels in the first quarter of 2025, underscoring the growing unpredictability that has become a global feature.
Firms face difficult choices: stockpiling goods, rerouting shipments or paying higher transport costs. In early 2025, volatility in US imports increased compared to the previous year, even before tariffs came into force, as companies scrambled to adjust. The cost of uncertainty itself often outweighs the tariff.
Small exporters and developing economies bear the heaviest burden, with limited finance or logistics to cushion the shock.
Second, risks to financial and macro stability
Uncertainty spills far beyond ports. Exchange rates swing, capital flows tighten and borrowing costs rise.
For developing countries, where access to trade finance is already scarce, this translates into squeezed credit and curtailed investment. With global interest rates still high, the added burden of unpredictability deepens fiscal fragility – limiting governments’ ability to fund growth and social development.
Third, erosion of trust and cooperation
Perhaps most damaging is the breakdown of confidence. When policies are unclear or rules selectively applied, governments turn to unilateral actions that invite retaliation.
This cycle feeds volatility across supply chains. UNCTAD data show that while advanced economies saw steady import trends, developing countries faced sharper swings in early 2025 – and least developed countries experienced a delayed but steeper spike later in the year. This underlines how the most vulnerable are also the most exposed.
The cost of unpredictability is clear: volatility punishes those least able to absorb it. But there are ways forward. Diversifying markets, strengthening trade agreements and giving firms advance notice of policy shifts can reduce risk. Above all, restoring stability and predictability is essential – for businesses to invest, for countries to grow and for trade to fulfil its role as a driver of development.
As this Global Trade Update shows, uncertainty has become the new tariff and its price is being paid across the world economy.
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