Asia and the Pacific remained a central driver of global
trade and investment in 2025, despite slowing momentum amid
rising geopolitical and policy uncertainties. The
Asia-Pacific Trade and Investment Briefs 2025/26,
released by the United Nations Economic and Social
Commission for Asia and the Pacific (ESCAP), show that
tariff anticipation and digital investment drove a temporary
upswing in trade last year while firms also sought to
rebalance and diversify.
Merchandise trade sees
temporary uplift amid tariff anticipation
Global
merchandise export volume grew by 2.8 per cent in 2025,
fuelled by strong demand and front-loading of shipments
ahead of anticipated tariff increases. Export shipments from
Asia and the Pacific also increased, although regional
growth slowed to 3.3 per cent, still outpacing the global
average. However, falling prices and intensified competition
limited financial gains.
Trade expansion was uneven
across subregions. Electronics-led export growth was
concentrated in East Asia and South-East Asia, while South
and South-West Asia experienced a decline of around 2 per
cent. Although intraregional trade remained a key anchor,
supply chains increasingly prioritized risk diversification
over cost efficiency, with firms accelerating reshoring and
nearshoring toward the United States and the European Union
alongside broadening supply chains locations.
Regional
trade growth is projected to drop to around 0.6 per cent in
2026 due to rising geopolitical tensions and restrictive
trade policies.
Digital services exports expand,
traditional sectors slow down
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Commercial services
trade in Asia and the Pacific continued to outperform
merchandise trade in 2025, although growth lagged behind the
global recovery. Services exports rose by 5.4 per cent,
reflecting weak sentiment in major economies such as Japan
and China. Services firms are diversifying into South-East
Asia and India as alternative hubs to mitigate supply chain
vulnerabilities.
All subregions recorded export
growth, led by East and North-East Asia at 7 per cent, while
growth in the Pacific remained modest at around 1 per
cent.
Modern services powered export gains, led by
telecom, ICT and computer services (13 per cent), and
business and financial services (11 per cent). Travel and
transport posted solid gains but lost momentum. Construction
services fell sharply by 11 per cent amid a real estate
downturn.
Intra-regional services trade strengthened
further, accounting for around 21 per cent of exports and
driven by South-East Asian exports to East Asia. 2026 growth
projections remain positive at 4.4 per cent for services
exports, buoyed by digital services.
The world’s
hub for trade agreements
Asia and the Pacific
accounted for 61 per cent of all active preferential trade
agreements worldwide, with 258 agreements presented in the
region. In 2025, 12 new agreements were signed, with
continued expansion of Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP), Regional
Comprehensive Economic Partnership (RCEP) and ASEAN
frameworks and growing engagement with partners in Europe
and the Gulf Cooperation Council.
Sustainability and
supply chain resilience provisions were included in 158
agreements. The region also continued to lead digital trade
rule-making, participating in 12 of the world’s 16 Digital
Trade Agreements. Issue-based arrangements and mini-FTAs
expanded further to support targeted cooperation and
de-risking.
Looking ahead, ESCAP notes the need to
harmonize fragmented rules and ensure inclusive
participation for less developed economies, while
strengthening regional cooperation mechanisms that reinforce
the global rules-based system.
FDI becomes more
selective adjusting to new realities
Greenfield
foreign direct investment announcements in terms of capital
investment pledges in Asia and the Pacific fell by 21 per
cent to $253 billion, but the number of project
announcements reached near-record levels indicating capital
intensity and scale are decreasing more than the general
appetite for international operations in the region.
South-East Asia remained the top destination at $74.4
billion.
India was the largest individual target
economy at $50 billion, followed by Australia at $30 billion
and Republic of Korea at $25 billion. The Republic of Korea
saw the largest surge with a 303 per cent increase in
investment commitments. Services accounted for more than 60
per cent of FDI projects, led by ICT and renewable energy.
Manufacturing investment shifted toward metals in part
driven by demand for renewable power and advanced
technologies, while the primary sector continued to decline.
Market proximity motivated 52 per cent of project
announcements, and FDI trends also show a shift from
low-cost efficiency to
‘innovation-seeking’.
