Future of Global Trade: Key Challenges Ahead

The landscape of global trade is set to undergo significant changes by 2025. Various factors are influencing this transformation, including geopolitical tensions, potential trade wars, and the rise of sustainability demands. Experts emphasize the need for Indian exporters and importers to work closely with the government to navigate these challenges effectively. With the rapid advancements in artificial intelligence (AI), there is a pressing need for India to prioritize its AI strategy. This technology is expected to revolutionize trade logistics, supply chain management, and traditional trade patterns.
Geopolitical Tensions and Trade Wars
Geopolitical tensions are a major concern for global trade. The possibility of a US-led trade war under Donald Trump could reshape trade dynamics significantly. Trade expert Deep Kapuria warns that retaliatory measures from Washington could disrupt global supply chains and foreign direct investment (FDI). The recent series of global shocks, including the Covid-19 pandemic and the Russia-Ukraine war, have prompted nations to reevaluate their trade relationships. Countries are increasingly seeking partnerships that align with their economic and security priorities.
Kapuria highlights that while geopolitical tensions are largely beyond the control of the private sector, businesses in developing countries must focus on meeting environmental and social sustainability standards. Compliance with these standards is crucial for integration into global value chains (GVCs). New laws, such as the EU Corporate Sustainability Due Diligence Directive, mandate that companies ensure their supply chains are sustainable. This shift towards sustainability is not just a trend; it is becoming a legal requirement for businesses aiming to compete on a global scale.
The Role of Artificial Intelligence in Trade
Artificial intelligence is emerging as a transformative force in global trade. Kapuria notes that AI is set to boost services trade and create entirely new categories of tradable goods, such as autonomous vehicles and robotics. The digital transformation driven by AI will enhance trade logistics and supply chain management, making them more efficient and responsive to market demands.
Indian industries must invest in new-age technologies to remain competitive. SK Saraf, founder chairman of Technocraft Industries, emphasizes the opportunities for Indian exporters in the US market. If the US imposes higher tariffs on Chinese goods, Indian exporters could benefit significantly. This situation presents a unique opportunity for Indian businesses to increase their exports to the US. However, they must be prepared to adapt to the changing landscape and leverage AI to enhance their competitiveness.
Sustainability as a Trade Imperative
Sustainability is becoming a critical factor in global trade. The Federation of Indian Export Organisations (FIEO) president Ashwani Kumar has called for the establishment of certified agencies to measure carbon emissions in domestic manufacturing practices. This initiative is essential as EU measures could pose significant challenges for Indian exporters. The EU is leveraging trade agreements to push sustainability agendas in partner countries, making it imperative for Indian businesses to comply with these standards.
Kumar highlights the importance of engaging foreign agencies to assist in measuring carbon emissions. This collaboration will help Indian exporters align with international sustainability standards. As global trade increasingly prioritizes environmental goals, Indian industries must adapt to these changes. Meeting sustainability indicators will not only enhance their competitiveness but also ensure their integration into global value chains.
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