Asia and the Pacific remained a central pillar of global trade and investment in 2025, but momentum slowed as geopolitical tensions, policy uncertainty and structural adjustments weighed on growth. According to the Asia-Pacific Trade and Investment Briefs 2025/26 released by the United Nations Economic and Social Commission for Asia and the Pacific, last year’s trade performance was boosted by temporary factors such as tariff anticipation and accelerated digital investment, while firms increasingly moved to rebalance and diversify supply chains.
Global merchandise export volumes expanded by 2.8 per cent in 2025, driven largely by strong demand and the front-loading of shipments ahead of expected tariff increases. Exports from Asia and the Pacific also grew, rising by 3.3 per cent and continuing to outpace the global average, although falling prices and intensified competition limited the financial benefits of this growth. The gains were uneven across the region, with electronics-led expansion concentrated in East Asia and South-East Asia, while South and South-West Asia recorded a decline of about 2 per cent.
Despite intra-regional trade remaining a stabilizing force, supply chains increasingly prioritized resilience over cost efficiency. Companies accelerated reshoring and nearshoring toward the United States and the European Union, while also spreading production across a wider range of locations to reduce risk exposure. Against this backdrop, regional merchandise trade growth is projected to slow sharply to around 0.6 per cent in 2026 as geopolitical tensions rise and trade policies become more restrictive.
In contrast, commercial services trade continued to outperform merchandise trade, even as growth lagged the global recovery. Services exports from Asia and the Pacific increased by 5.4 per cent in 2025, reflecting weaker sentiment in major economies such as Japan and China. Firms responded by diversifying operations into South-East Asia and India, positioning them as alternative service hubs to mitigate supply chain vulnerabilities.
All subregions posted services export growth, led by East and North-East Asia at 7 per cent, while the Pacific saw modest growth of around 1 per cent. Modern services drove expansion, with telecom, information and communication technology and computer services surging by 13 per cent, alongside strong gains in business and financial services at 11 per cent. Travel and transport recovered but lost momentum, while construction services fell sharply by 11 per cent amid a regional real estate downturn. Intra-regional services trade strengthened further, accounting for roughly 21 per cent of exports, supported largely by South-East Asian exports to East Asia. Services exports are projected to grow by 4.4 per cent in 2026, underpinned by continued expansion in digital services.
The region also reinforced its position as the world’s leading hub for trade agreements. Asia and the Pacific accounted for 61 per cent of all active preferential trade agreements globally, with 258 agreements in force. In 2025 alone, 12 new agreements were signed, including further expansion of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Regional Comprehensive Economic Partnership and ASEAN-led frameworks, alongside deeper engagement with partners in Europe and the Gulf Cooperation Council.
Sustainability and supply chain resilience provisions featured in 158 agreements, while the region remained at the forefront of digital trade rule-making, participating in 12 of the world’s 16 digital trade agreements. Issue-specific arrangements and smaller-scale trade agreements continued to expand, reflecting efforts to support targeted cooperation and de-risking. ESCAP cautioned that future progress will depend on harmonizing fragmented rules, ensuring inclusive participation for less developed economies and strengthening regional cooperation that supports the global rules-based system.
Foreign direct investment trends highlighted a more selective approach by investors as conditions evolved. Greenfield FDI capital investment pledges in Asia and the Pacific fell by 21 per cent to $253 billion, even as the number of announced projects reached near-record levels, indicating declining capital intensity rather than waning interest in international operations. South-East Asia remained the largest recipient with $74.4 billion, while India emerged as the top individual destination at $50 billion, followed by Australia at $30 billion and the Republic of Korea at $25 billion.
The Republic of Korea recorded the strongest surge, with investment commitments rising by 303 per cent. Services accounted for more than 60 per cent of FDI projects, led by information and communication technology and renewable energy. Manufacturing investment shifted toward metals, partly driven by demand linked to renewable power and advanced technologies, while investment in the primary sector continued to decline. More than half of all projects were motivated by market proximity, underscoring a broader shift away from low-cost efficiency toward innovation-seeking investment strategies across the region.
