Patterns and volume of world trade

Factors that change trade patterns

• Emerging economies: countries such as China and India now account for far more world trade, as exporters of manufactures and services and as importers of raw materials.
• Changes in comparative advantage: as wages and skills rise, countries move into higher-value goods; low-wage assembly moves elsewhere.
• Trading blocs and bilateral agreements: trade grows between members (trade creation) and may switch away from non-members (trade diversion).
• Relative exchange rates: a depreciation makes a country's exports cheaper and imports dearer.
• Changes in protectionism: new tariffs or sanctions redirect flows, as firms find routes around barriers.

Recent evidence

The WTO (October 2025) reported:

• merchandise trade volume grew 2.8% in 2024; it forecast 2.4% for 2025 and only 0.5% for 2026, linked to higher tariffs;
• in the first half of 2025, trade among developing economies (South-South trade) rose about 8% in value year on year;
• trade in AI-related goods grew about 20% in value, close to half of the overall expansion;
• Asia and Africa were expected to have the fastest export volume growth in 2025, with North America's exports declining.

Source: WTO, 7 October 2025

Explaining a change in an exam

Use a chain: cause -> change in relative prices or costs -> change in demand for a country's exports -> change in flows. For example: 'Rising wages in Country A reduce its cost advantage in assembly, so firms move assembly to Country B; A's exports of assembled goods fall and B's rise.' Then evaluate: how big, how fast, and does it depend on non-price factors such as quality and reliability?

Worked example

A volume index of world merchandise trade is 100 in 2024. Using the WTO forecasts of 2.4% growth in 2025 and 0.5% in 2026, find the index in 2026 to 1 decimal place.

1. 2025: 100 x 1.024 = 102.4
2. 2026: 102.4 x 1.005 = 102.912

Answer: 102.9

Check yourself

1. A trade volume index is 100 in 2024 and grows by 2.4% in 2025. What is the index in 2025?
   Show answer

   102.4. 100 x 1.024 = 102.4.

2. Country Z's exports to a trading partner rise from $40 bn to $46 bn. Calculate the percentage increase.
   Show answer

   15 %. (46 - 40) / 40 x 100 = 15%.

3. Rising wages in a country that assembles electronics most likely lead to
   • assembly moving to lower-wage economies
   • a rise in its comparative advantage in low-skill assembly
   • an automatic fall in its exchange rate
   • an end to all its exports
   Show answer

   assembly moving to lower-wage economies. Its cost advantage in labour-intensive work falls, so comparative advantage shifts.

4. A depreciation of Country K's currency is most likely to
   • make K's imports cheaper
   • reduce K's exports
   • have no effect on trade flows
   • increase the volume of K's exports
   Show answer

   increase the volume of K's exports. Exports become cheaper in foreign currency terms.

5. Explain how joining a trading bloc can change a country's pattern of trade.
   Show answer

   Tariffs on trade with other members are removed, so trade with members rises (trade creation) and imports may switch from cheaper non-members to members (trade diversion).. Blocs redirect trade towards members.

6. The WTO reported that South-South trade rose in value in the first half of 2025. South-South trade means trade between
   • developed economies
   • countries in the southern hemisphere only
   • a country's southern regions
   • developing economies
   Show answer

   developing economies. The term describes trade among developing economies.

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Sources

• Pearson Edexcel International Advanced Level in Economics specification (issue 2)
• WTO press release: Global trade outlook and statistics, 7 October 2025

Last updated 8 November 2026. Spotted a mistake? Tell us.