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MARCH 2026

Merchandise export growth (y-o-y basis) in the UK was war did not derail export growth as much as expected
highly volatile throughout 2025, surging to 21.5 per cent because tariff escalations were deferred, while China
in Q1 before moderating to 4.6 per cent in Q2, which kept negotiating with the US for lower tariffs. Even as
was matched by the pound’s NEER also fluctuating the depreciation continued in Q4 (to -3.6 per cent),
significantly, moving from –0.2 per cent in Q1 to a sharp export growth slowed down to 3.8 per cent in the same
appreciation of 6.3 per cent in Q2. The strong period. Essentially, the depreciating currency
appreciation in Q2 continued to weigh on export supported export performance in the first three
competitiveness, subsequently contributing to slower quarters of the year but slowing global demand and
export growth even in the second half of 2025. Export fading front-loading effects weighed down on export
growth rebounded to 7.1 per cent in Q3, before declining growth in the last quarter of 2025.
sharply to –8.4 per cent in Q4. In the second half of
2025, the pound depreciated both in Q3 and Q4. UK’s
export structure, particularly energy products, D. Conclusion
chemicals, pharmaceuticals and specialized machinery,
makes it highly sensitive to shifts in global commodity The global economy in 2026 is reconfiguring as trade
prices and demand. While the depreciation later in the persists, finance adapts and global growth remains
year improved price competitiveness, weakening resilient in a policy sensitive environment. The
external demand, dim manufacturing sector geo-political crisis due to the West Asia tensions
performance, fading front-loading effects and slowing highlights how conflict and disruptions in critical energy
growth in key trading partners (like the EU), dampened corridors can quickly transmit across oil prices,
export momentum, leading to the sharp contraction in logistics networks and global finance, affecting trade,
export growth in the fourth quarter of 2025. inflation and financial markets. This can amplify
In Japan, merchandise export growth in 2025 inflationary pressures and external imbalances,
quickened from 5 per cent in Q1 to 7.8 per cent in Q2, especially for energy-importing economies. Sustaining
while the NEER steadily depreciated from 2 per cent in growth will depend on policy coordination,
Q1 to -2 per cent in Q2. Growth in exports decreased to supply-chain resilience and the ability of economies to
1.4 per cent in Q3 before recovering modestly to 3.8 per manage external shocks in an increasingly uncertain
cent in Q4 in tandem with a depreciating currency over environment.
the same period. While the weaker yen supported
exports later in the year, slowing global demand,
particularly for automobiles and capital goods,
dampened export momentum in the third quarter.

China’s merchandise export growth strengthened from
5.6 per cent in Q1 to 6.5 per cent in Q3, while the
currency depreciated steadily as the NEER shifted from
a 5.3 per cent appreciation to -1.8 per cent depreciation
over the first three quarters of 2025, improving export
competitiveness. Amid tariff pressures from the US,
China’s manufacturing exports showed resilience,
particularly in electronics and intermediate goods, as
well as diversification of export markets towards
ASEAN, Africa and Central Asia. On the upside, the tariff

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