Global Trade Shifts 2025: How India Is Positioning Itself in the Value Chain

The year 2025 marked a period of significant turbulence for global trade. U.S. tariffs and a series of trade restrictions triggered ripple effects worldwide. When other nations responded with their own measures, global trade barriers reached heights not seen in decades. Long-established trade networks began to show signs of strain, giving the impression that a phase of deglobalization might be underway, with countries increasingly focusing on domestic markets.

Yet, a complete collapse of global trade did not occur. Instead, the global economy faced a severe stress test and began adapting to new constraints. Annual reports from organizations like the World Trade Organization and the Asian Development Bank track changes in global value chains, offering insights into how economies are adjusting. The 2025 report, though over 40 pages long, conveys both challenges and opportunities.

Global Developments in 2025

Fragmentation has been the dominant trend in recent years. A decade ago, the world seemed to be moving toward a highly integrated global economy. Since 2018, however, geopolitical tensions—most notably the U.S.-China trade war—have disrupted this trajectory. Global trade continues, but volumes are declining.

The sharpest disruption occurred in 2022, when Russia’s invasion of Ukraine severed many trade links. Although trade stabilised in 2023 and 2024, the first half of 2025 saw renewed fragmentation, with the U.S.-China trade relationship weakening rapidly.

This decline in trade between certain countries does not indicate the end of globalisation. While bilateral trade may slow, the broader global value chain structure remains intact. At its peak in 2022, nearly 48% of world trade involved global value chains; by 2025, this figure had only slightly fallen to 46.3%. Moreover, new economies such as Mexico and Vietnam are becoming increasingly integrated into these networks, highlighting shifts in production and distribution patterns.

In the services trade, disruptions have been even less pronounced. Over the past five years, services—particularly finance and information technology—have become the most resilient part of global value chains, capable of withstanding shocks such as pandemics and geopolitical crises.

Looking Ahead: Adaptation and Shifts

Globalisation continues, but its patterns are evolving. Direct trade between geopolitical rivals is decreasing, while intra-bloc trade has accelerated. Since 2017, trading within economic blocs has grown roughly 4% faster than trade between blocs. For example, U.S.-China trade has expanded about 30% slower than trade with other nations.

At the same time, connector economies are emerging. These countries act as intermediaries, facilitating trade between rivals. By 2024, Mexico became a key transit hub for Chinese goods entering the U.S., while Kazakhstan enabled Russia to maintain imports despite sanctions. Connector economies typically engage in specific stages of production, such as assembly or packaging, integrating themselves into global value chains without controlling entire networks.

Industrial Policies and Supplier Diversification

Rising uncertainty prompted many businesses to diversify suppliers, but most adjustments were superficial. Only meaningful trade relationships—partners accounting for more than 1% of trade—deliver real benefits. The “China Plus One” strategy, for instance, only succeeds when new suppliers are capable of replacing existing ones.

The report introduces a Global Value Chain Readiness Index to evaluate potential suppliers, emphasizing factors like connectivity, customs efficiency, permitting, and financial access.

Countries also responded with industrial policies to strengthen domestic production of critical goods, from semiconductors to green technologies. While some policies, such as China’s shipbuilding subsidies, may seem inefficient, they can generate broader economic benefits, including lower global shipping costs and increased exports.

Targeted Trade Deals

Global uncertainty has also spurred an increase in focused trade agreements. Unlike traditional comprehensive deals, these narrow agreements target critical minerals, digital trade, and technology cooperation. In recent years, critical mineral deals have grown roughly 15-fold, and digital trade agreements about 35-fold. These deals are often limited in scope and binding power, but are most successful between countries with existing strong trade ties.

India’s Position in Global Trade

India is increasingly prominent in global value chains, contributing 2.8% to the world’s export basket, with services playing a major role. Evaluations of India’s readiness show strengths in financial reserves, logistics, and business climate, while areas such as firm capacity, energy infrastructure, and financial depth lag behind.

India is among 16 countries expanding deeper into global production networks, positioning itself to play a more complex and significant role in international trade.

What's The Final Conclusion

Global trade in 2025 faced disruptions, yet adaptation and resilience remain evident. Fragmentation is occurring between certain nations, but global value chains are evolving rather than collapsing. Connector economies are gaining importance, industrial policies are reshaping production, and India is steadily strengthening its presence.

The coming years will reveal whether global trade continues to fragment or if countries can secure stable positions within these evolving networks.

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Disclaimer:

The insights and data referenced in this piece are drawn from the Global Value Chain Development Report 2025 – Rewiring GVCs in a Changing Global Economy and are presented for informational and educational use.