Geopolitical Conflicts and Retaliatory Policies Driving Global Trade Contraction, Expert Warns

Ongoing wars and retaliatory economic measures are among the main factors behind the slowdown in global trade and economic growth, according to Maisarah Bakkour, Director of the Arab-European Center for Studies.

Global economic growth is projected to decline to 2.3% in 2025, driven largely by geopolitical and military conflicts in key regions. Bakkour pointed to the Israeli assault on Gaza, the war in Ukraine, and mounting tensions between Iran and Israel as major disruptions in areas that serve as transit routes for 60% to 70% of the world’s oil supplies.

“These conflicts have shrunk global trade flows and deepened uncertainty about the economic and political future,” he noted, emphasizing that the term “uncertainty” has become a recurring theme in international economic reports.

Bakkour also highlighted the role of retaliatory policies, particularly U.S. tariffs on imports from multiple countries, in worsening the global investment climate. He said that U.S. financial policies, including interest rate hikes on the dollar, have triggered a capital flight from developing countries toward American markets. This shift has reduced investment in emerging economies, driving down production and pushing prices higher.

Citing recent examples, Bakkour pointed out that major companies such as Adidas have announced price increases, while auto industry reports predict car prices could rise by as much as \$4,000 — trends that weaken consumer purchasing power, slow spending, cut tax revenues, and ultimately strain global economies.

Developing countries, he warned, will bear the brunt of this downturn due to weak infrastructure, especially in transportation, and heavy reliance on raw material exports. These vulnerabilities leave them more exposed to global tax and market fluctuations.

Bakkour urged developing nations to adopt diversification strategies, promote transparency, encourage local investment, and rationalize government spending. “These steps,” he said, “are the only way to navigate the uncertainty threatening global economic stability.”