In 2025, Asia-Pacific remained a pivotal force in global trade despite slowing momentum due to geopolitical tensions and policy uncertainties.
The region saw a temporary boost in merchandise trade, driven by tariff anticipation and digital investments.
However, trade growth is expected to slow in 2026, with firms focusing on diversifying supply chains and reshoring production.
Asia and the Pacific remained a key engine of global trade and investment in 2025, even as overall momentum eased amid mounting geopolitical strains and policy uncertainty. According to the Asia-Pacific Trade and Investment Briefs 2025 / 26 released by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), tariff anticipation and digital investment triggered a short-term boost in trade last year, while companies moved to rebalance and diversify supply chains.
Global merchandise export volumes rose 2.8 per cent in 2025, supported by firm demand and the front-loading of shipments ahead of expected tariff hikes. Exports from Asia and the Pacific also expanded, with regional growth at 3.3 per cent — above the global average. But declining prices and intense competition curbed financial returns.
Performance varied widely across subregions. Electronics-driven exports powered growth in East and South-East Asia, while South and South-West Asia saw exports contract by about 2 per cent. Although intra-regional trade remained a stabilising force, supply chain strategies increasingly prioritised risk diversification over cost efficiency. Firms accelerated reshoring and nearshoring toward the United States and the European Union, while also broadening production locations.
ESCAP projects regional trade growth to slow sharply to around 0.6 per cent in 2026, reflecting escalating geopolitical tensions and tighter trade policies.
Commercial services trade continued to outperform goods trade in 2025, though growth trailed the global rebound. Services exports from Asia and the Pacific rose 5.4 per cent, despite subdued sentiment in major economies such as Japan and China. Companies increasingly diversified operations into South-East Asia and India to reduce supply chain risks.
All subregions recorded services export growth. East and North-East Asia led with 7 per cent growth, while the Pacific posted more modest gains of about 1 per cent.
Modern services drove expansion, with telecom, information and communication technology and computer services up 13 per cent, and business and financial services growing 11 per cent. Travel and transport improved but lost momentum, while construction services plunged 11 per cent amid a property sector downturn.
Intra-regional services trade strengthened further, accounting for roughly 21 per cent of exports, largely supported by South-East Asian flows to East Asia. Services export growth is forecast to remain resilient in 2026 at 4.4 per cent, underpinned by digital sectors.
Asia and the Pacific accounted for 61 per cent of all active preferential trade agreements globally, with 258 agreements in force. In 2025 alone, 12 new deals were signed, alongside continued expansion of frameworks such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, Regional Comprehensive Economic Partnership and the Association of Southeast Asian Nations arrangements, as well as deeper engagement with partners in Europe and the Gulf Cooperation Council.
Sustainability and supply chain resilience provisions featured in 158 agreements. The region also remained a leader in digital trade rule-making, participating in 12 of the world’s 16 Digital Trade Agreements. Issue-specific arrangements and mini-FTAs continued to grow, aimed at targeted cooperation and de-risking.
ESCAP highlighted the need to harmonise fragmented trade rules, ensure inclusion of less developed economies, and reinforce regional cooperation to support the global rules-based system.
Foreign direct investment (FDI) trends showed a shift in character. Greenfield FDI announcements in capital terms fell 21 per cent to $253 billion, but the number of projects approached record highs, suggesting declining capital intensity and scale, rather than reduced interest in operating in the region. South-East Asia remained the leading destination, attracting $74.4 billion.
India emerged as the largest single recipient of greenfield FDI with $50 billion in commitments, followed by Australia at $30 billion and the Republic of Korea at $25 billion. The Republic of Korea recorded the sharpest increase, with investment pledges surging 303 per cent.
In Asia and the Pacific, services accounted for more than 60 per cent of FDI projects, led by ICT and renewable energy. Manufacturing investment shifted toward metals, partly driven by demand linked to renewable energy and advanced technologies, while investment in the primary sector continued to decline.
Market proximity was the key driver behind 52 per cent of project announcements and broader trends indicate a move away from low-cost efficiency toward innovation-seeking investment strategies.