UNIDO Policy Brief: Global Trade Costs Demand Resilient and Diversified Supply Chains
SDG 9: Industry, Innovation and Infrastructure | SDG 8: Decent Work and Economic Growth
Institutions: Ministry of Commerce and Industry | Ministry of External Affairs
A new the United Nations Industrial Development Organization (UNIDO) policy brief warns that escalating global trade costs are challenging the traditional model of trade-led development for industrializing countries. These profound disruptions stem from new factors like the 2025 US tariff measures, geopolitical conflicts, and advanced economies’ sustainability-driven legislation (e.g., the European Union’s Carbon Border Adjustment Mechanism (CBAM)). The analysis notes that these shocks create “winners and losers” via trade diversion and can lead to severe trade depression.
To counter these growing uncertainties, the brief urges countries to urgently prioritize resilience. The suggested national strategies include enhancing export diversification and value addition, investing in quality infrastructure, and strengthening domestic and regional supply chains. These measures are deemed vital for enabling countries to seize new trade opportunities in an increasingly fragmented global environment.
This report validates India’s domestic focus on resilience and self-reliance (Atmanirbhar Bharat) and underscores the necessity of proactive trade diplomacy to mitigate risks from tariff shocks and to comply with new sustainability standards like CBAM.
What is trade diversion in supply chain disruptions? Trade diversion occurs when importers shift their sourcing from a supplier in a country facing high tariffs (or other trade costs) to an alternative supplier in a country with lower tariff exposure, allowing the latter country to gain market share purely through substitution effects.
Follow the full update here: https://www.unido.org/sites/default/files/unido-publications/2025-10/IID%20Policy%20Brief%2026%20-%20Resilient%20global%20supply%20chains%20in%20times%20of%20escalating%20trade%20costs.pdf