Foreword
When we discuss international trade, we typically speak of supply chains – networks of factories, farms, ports and transport routes that move goods across borders. But there is another architecture lying beneath this visible flow, one less discussed yet equally powerful: the architecture of balance sheets.
Trade is not just a concatenation of suppliers. It is also the concatenation of credit lines, payment systems, currency markets and capital flows. Over 90 per cent of world trade depends on trade finance and cross-border banking infrastructure. While one system – the network of suppliers – has become increasingly decentralized and diversified, the other – the f inancial infrastructure enabling trade – remains remarkably concentrated. This asymmetry matters. The linkages to finance carry their own dynamics: how credit flows and at what price, which countries can access it, and which cannot, and how risks are propagated through the system when shocks hit.
This year’s Trade and Development Report places these financial dynamics centre stage, understanding that the intersection between trade and finance has never been more critical. The global economy is showing an uneasy resilience in the face of significant headwinds. Despite the sharpest tariff increases in decades and mounting geopolitical tensions, world trade grew approximately 4 per cent in real terms during the first half of 2025. Netting out frontloading and investments related to artificial intelligence, we calculated the underlying trade growth at about 2.5–3.0 per cent. As in recent years, services and South–South trade are outperforming global averages.
Yet this resilience may prove fleeting. Developing economies remain vulnerable to currency volatility, financial infrastructure disruptions and shifts in risk pricing originating in distant f inancial centres. When major central banks adjust monetary policy, or investor appetite for risk shifts, these movements ripple through the global financial system, affecting the real economy and trade conditions across the global South.
The asymmetry is striking. Economies of the global South today account for over 40 per cent of global output, above 50 per cent of foreign direct investment inflows and more than 40 per cent of trade. Their share of merchandise exports has grown from roughly 30 per cent in 2000, to over 45 per cent today. Yet their position in global financial markets tells a different story. They remain peripheral to the equity and bond markets that finance long term development: the North’s market capitalization stands at over three times that of the South, with 40 per cent of the global bond market residing in just one country. Sitting on the periphery means that developing countries access credit on far more expensive terms and operate with financial infrastructure lacking the depth and liquidity to support domestic capital formation. This gap in access constrains fiscal space, limits domestic capital raising and reinforces external financing dependence, creating structural headwinds that domestic policy efforts can seek to navigate, though not fully offset, in the absence of complementary reforms in the global financial system.
The report also examines how financialization has transformed commodity markets, where pricing increasingly reflects financial strategies rather than supply and demand. In global food systems, financial intermediation accounts for over 75 per cent of major trading companies’ revenues. Producers in developing countries struggle to compete against large multinational enterprises using financial markets for pricing advantages, while structured credit and securitization raise concerns about stability, illicit finance and market concentration.
The enduring dominance of the dollar is likewise addressed. While its share in official foreign exchange reserves has declined since 2000, no other currency has risen to replace it. The dollar continues to dominate international payments and capital markets, shaping both opportunities and constraints for developing economies.
What does genuine resilience require? Integrated policy frameworks that recognize links between trade, finance and sustainability. Strengthening of domestic financial ecosystems while advancing regional capital markets alongside trade integration. Reform of the international monetary arrangements to reduce volatility. The tools exist; the challenge is coordination and commitment.
Fundamentally, trade and finance cannot be treated separately; they are interrelated and central to development. Choices about financial architecture directly shape which countries can trade, what they trade, and whether trade advances sustainable development.
This Trade and Development Report maps out the terrain where trade meets finance, identifies mechanisms through which financial conditions shape trade outcomes and proposes concrete measures to build resilience while preserving openness. The report puts a spotlight on that hidden architecture – and charts pathways to strengthen it for shared prosperity.