Global Insights: Understanding International Markets

The world economy in 2026 stands at a crossroads, marked by both challenges and unprecedented opportunities. Decision-makers and businesses must navigate complex shifts to thrive in this dynamic environment.

A Shifting Global Landscape

The latest projections place global economic growth at 3.3% for 2026, a modest upward revision from last year. Yet beneath this headline figure lies considerable regional variation and emerging vulnerabilities.

Developing economies excluding China are expected to slow to around 4.2% growth, while established markets face headwinds. The United States, for example, is forecasted to decelerate to 1.5%, down from 1.8% in 2025, reflecting subdued consumer spending and constrained fiscal stimulus. Meanwhile, China’s growth moderates to 4.6%, underscoring the dual challenge of managing debt levels and sustaining domestic demand.

Europe contends with modest demand levels amid limited policy support, highlighting the need for renewed fiscal buffers and targeted public investments. At the same time, technology investment and accommodative monetary conditions offer glimmers of resilience, especially as the private sector adapts with agility.

Trade Tensions and Protectionism

Global trade reached a record $35 trillion in 2025, up 7% year-on-year. Yet 2026 will test the resilience of this growth as geopolitical fragmentation and rising tariff barriers reshape supply chains.

Significant tariff increases, particularly from the United States, continue to target critical industries such as semiconductor equipment and critical minerals. Section 232 measures and other industrial policies heighten uncertainty, discouraging long-term investment and penalizing smaller economies with less diversified exports.

As governments weigh strategic objectives against the benefits of open markets, a critical question emerges: will major players uphold decades of liberal trade rules or resort to unilateral protectionist measures? The answer will determine whether global trade can sustain its current momentum or enter a prolonged contraction phase.

Reconfiguring Global Value Chains

Nearly two-thirds of global trade flows through value chains, now undergoing profound reconfiguration. Firms are diversifying suppliers and relocating production closer to critical markets to reduce geopolitical risk and maintain operational resilience.

• Nearshoring and friend-shoring initiatives in North America and Europe
• Expansion of digital manufacturing hubs in Southeast Asia
• Integration of green standards and carbon accounting across all tiers

This reallocation represents more than logistical changes; it signifies a fundamental shift in how multinational enterprises assess risk, optimize costs, and comply with evolving regulatory frameworks.

The Rise of Services and Digital Trade

Services now account for 27% of global trade, having grown by approximately 9% in 2025—far outpacing goods. As digitalization advances, digitally deliverable services constitute 56% of global services exports, transforming the trade landscape.

However, a stark digital divide persists:

• Developed economies deliver 61% of services exports digitally
• Least developed countries manage just 16% through digital channels

This gap underscores the imperative for infrastructure investment, skills development, and supportive regulation. Without these, developing countries risk being left behind in the fastest-growing segment of international commerce.

South-South Trade Momentum

Trade between developing countries has emerged as a powerful engine of growth. South-South merchandise exports surged from $0.5 trillion in 1995 to $6.8 trillion in 2025, now representing 57% of developing-country exports.

Regional value chains in East and Southeast Asia, particularly for high-tech manufacturing, have driven this surge. Meanwhile, over half of Africa’s exports now flow to other developing regions, highlighting deeper economic integration and mutual resilience as demand softens in advanced markets.

E-Commerce and Digital Business Trends

By 2026, global B2B e-commerce will be valued at $36 trillion, propelled by sectors such as advanced manufacturing, energy, and healthcare. B2C e-commerce is set to reach $5.5 trillion by 2027, growing at a 14.4% compound annual rate.

• Asia-Pacific continues to expand its market share in online retail
• Latin America and the Middle East emerge as high-growth e-commerce regions
• India leads retail e-commerce development with a 14.1% CAGR

The shift to virtual sales is near universal in B2B; over 90% of firms have adopted digital models since 2020, even as cultures in South Korea and Japan retain a preference for face-to-face engagement.

Equity Markets and Investment Opportunities

International equities significantly outperformed U.S. stocks in 2025. The S&P Global Ex-US Broad Market Index rose over 28%, compared to 16% for the S&P 500. Developed ex-U.S. stocks gained 31%, with emerging markets up 20%.

Several tailwinds support further international gains in 2026: a weaker dollar, investor diversification strategies amid trade tensions, and resilient earnings growth in emerging markets. Forecasts suggest a 25–75 basis-point decline in U.S. interest rates, potentially bolstering risk assets.

Still, challenges remain: geopolitical risks, policy uncertainty, and exposure to commodity price swings. Countries like India, having lagged last year, could see stronger performance, while corporate governance reforms in Japan, Korea, and China narrow valuation discounts relative to U.S. peers.

Policy, Risks, and the Road Ahead

Policymakers face a delicate balancing act. Restoring fiscal buffers, preserving price stability, and reducing uncertainty are vital. At the upcoming WTO ministerial conference, decisions on agriculture, digital trade, and climate measures will shape whether multilateral rules adapt to modern challenges.

Key risks include technological recalibration, potential escalation of geopolitical tensions, and the ripple effects of delayed policy measures. As the world grapples with new trade barriers and shifting alliances, strategic foresight and robust institutional frameworks will be critical to sustaining inclusive growth.

In this era of transformation, businesses and governments must embrace change with resilience and innovation. By leveraging technology, diversifying partnerships, and committing to open, rules-based trade where possible, the global community can chart a path toward shared prosperity in 2026 and beyond.