UNCTAD warns the apparent strength in global trade is being skewed by a narrow AI hardware boom in the US and China.
It is masking stagnation in traditional industries and commodity sectors.
Developing economies face mounting financial stress, currency pressure and heightened exposure to global shocks.
The global economy is not just facing supply disruptions and inflation but is now shifting into a more fragile, prolonged period of uncertainty where countries, particularly developing economies, could be facing widespread financial stress and shortages, a new report by the United Nations Trade and Development (UNCTAD) has warned.
Trade and Development Foresights 2026 found that headline trade figures were being propped up by a narrow boom in artificial intelligence-linked products such as semiconductors, servers and data-processing equipment, particularly in the United States and China, while traditional industries and commodity-dependent sectors continued to stagnate.
The global merchandise trade growth was expected to slow from 4.7 per cent in 2025 to between 1.5 per cent and 2.5 per cent in 2026, triggered by intensifying geopolitical risks.
In terms of overall growth, UNCTAD projected global growth to slow from 2.9 per cent in 2025 to 2.6 per cent in 2026 as higher energy prices, transport disruptions, market volatility and search for financial safe assets weigh on investment and demand.
Though trade disputes and policy uncertainty have shaped the recent years, the report signalled a shift — geopolitical risk was now the dominant source of instability for the global economy.
And developing economies were especially exposed. “Many face rising bills for fuel, food and fertilsers while also dealing with currency pressure, tighter financing conditions and weaker investor sentiment,” it said.
This comes at a time when much of the resilience seen in 2025 was driven by the growing role of developing economies in global trade and growth.
“Prolonged instability now risks undermining that momentum,” the report said.
The report also highlighted increasing pressure on global food systems.
Higher energy prices have been driving up fertiliser costs and adding to food inflation pressures across many developing economies. At the same time, volatility and tighter financing conditions were exposing vulnerabilities across global food trading systems.
If these disruptions persist, the report warned that financial stress among major food trading firms could amplify food security risks, adding pressure on governments already facing limited fiscal space.
Moreover, food security, UNCTAD, pointed out worryingly, was no longer only about availability and prices but a financial stability concern, especially for governments already facing higher debt-servicing costs.