Global trade is continuing to expand despite tariffs, geopolitical uncertainty and shifting supply chains. Goods trade grew by an estimated four per cent in the first months of 2025, defying widespread expectations of a slowdown. Shipping routes are being reorganised, manufacturers have adapted to new trade corridors, and companies appear increasingly able to operate in a fractured geopolitical environment.
However, the Trade and Development Report 2025 titled *On the Brink* paints a very different picture beneath the surface. According to the United Nations Conference on Trade and Development (UNCTAD), the apparent resilience of trade activity hides a serious vulnerability in the financial system supporting global commerce. The report argues that world trade is being driven less by logistics and more by a highly concentrated financial structure that is now being destabilised by climate shocks, currency swings and tightening international liquidity.
“Trade is not just the concatenation of suppliers,” said Rebeca Grynspan, the secretary-general of UN Trade and Development. “It is also the concatenation of credit lines, payment systems, currency markets and capital flows.” UNCTAD cautioned that climate change is putting pressure on all of these critical financial links at the same time.
Financial Foundation of Trade Under Stress
More than ninety per cent of global trade depends on complex trade-finance tools, including letters of credit, supply-chain financing, digital clearing systems and various forms of financial guarantees. In effect, world trade today operates on balance sheets as much as it does on factory output or commodity production.
Behind each container is a credit approval. Behind every delivery route is a currency transaction. Behind every export agreement is a correspondence between banks.
This financial backbone, UNCTAD warned, is becoming more volatile. Dollar shortages, sanctions rules, currency depreciation and stricter banking regulations have already reduced the number of banks willing to support trade in Africa, South Asia and parts of Latin America. Climate change, the report noted, is now accelerating that trend.
Climate Impacts Reshaping Risk and Access
Intensifying storms, heatwaves, droughts and disruptions in commodity supply are increasingly being factored into financial risk calculations. Banks are tightening their lending rules, insurance costs are rising, and export guarantees are shrinking. Countries hit by repeated climate disasters are losing creditworthiness, making it harder for them to secure trade finance at the very moment when they need it most.
UNCTAD stated that severe weather events are increasing default risks in agricultural and commodity-focused economies. Currency volatility in climate-vulnerable nations is raising hedging costs. Financial institutions are reassessing whether they can extend loans to exporters in regions facing mounting climate-related risks.
According to the report, this creates a dangerous cycle: climate shocks weaken financial systems, which restricts access to trade finance, limiting export potential and slowing economic growth. That further increases countries’ vulnerability to climate impacts.
Emerging Divide in Global Trade
Although global trade numbers remain strong, UNCTAD warned of a growing divide between nations with stable financial systems and those that are being locked out of global markets. Countries with strong currencies and deep financial networks can continue managing volatile conditions. Meanwhile, climate-stressed economies face higher trade costs, reduced financial access and greater exposure to economic shocks.
The transition to a greener global economy may widen this gap. Exporters without affordable trade finance will struggle to meet sustainability standards, invest in clean technology or enter low-carbon supply chains. UNCTAD argued that climate-aligned development will depend not only on energy decisions but also on who controls the financial system behind world trade.
Call for Financial Reform
UNCTAD made clear that the climate crisis has become a financial threat, reshaping trade from the bottom up. To strengthen the global system, the report recommended:
• Greater public guarantees for trade finance in climate-vulnerable economies
• Multilateral development banks providing liquidity during economic shocks
• Policies to reduce currency risk for developing nations
• Expansion of regional financial platforms beyond dollar-centred models
• Rules to prevent environmental standards from becoming new trade barriers
Without such reforms, UNCTAD warned, global trade may become increasingly fragmented, driven not by broken supply chains but by failing financial structures.
A Fragile Future Beneath Strong Numbers
International shipping appears stable and containers are moving. On the surface, trade flows remain active. Yet, UNCTAD cautioned that below these positive indicators lies a fragile and narrowing financial foundation strained by climate stress, currency instability and liquidity pressures.
The next major disruption to global trade, the report suggested, may not be caused by political tensions or logistical failures, but by the unequal ability of nations to withstand climate-driven financial risks.