7 surprising facts about the "collapse" of global trade

1. Global Trade Hasn't Collapsed—It's Plateaued

The doom-and-gloom headlines miss the point. Exports as a share of world GDP surged from 15% in the 1980s to 30%¹ by the early 2000s—and have stayed there ever since. We're not seeing deglobalisation; we're seeing a mature, stable global trading system that's now reorganizing itself.

2. Emerging Markets Are Trading More With Each Other (Not Less With Everyone)

The biggest change? Emerging markets are increasingly bypassing traditional Western intermediaries and trading directly with each other. South-South trade flows are surging. This isn't isolation—it's diversification dressed up as nationalism.

3. "De-Dollarisation" Is Actually Making Companies Stronger

Companies in emerging markets are now issuing bonds in 18 different currencies—up from just 9 in 2005². Local currency bond markets hit record levels in 2024. More funding options mean more resilience, not less. The dollar isn't being rejected—it's being joined by alternatives.

4. Markets Are Eerily Calm Despite the Chaos

Despite trade tensions, geopolitical uncertainty, and economic nationalism, emerging market corporate debt markets show historically tight spreads. Only 4% of high-yield bonds³ are in distressed territory. Either markets are missing something big, or fundamentals are far stronger than the headlines suggest.

5. The Sector Shift Tells the Real Story

Traditional commodity exporters (metals, petrochemicals) have shrunk as a share of emerging market corporate debt, while utilities, healthcare, consumer goods, and tech have grown. This reflects a fundamental pivot from export-led manufacturing to domestic demand—a "growing up" of emerging economies.

6. Optionality Is the New Efficiency

In the old globalized world, you optimized for one supply chain, one market, one way of doing business. In the new world, winners are companies with multiple options: multiple markets, multiple supply routes, multiple funding sources, and natural currency hedges. Resilience trumps efficiency.

7. The Biggest Victims? Companies With Thin Margins and No Plan B

Trade tensions hit hardest when combined with thin profit margins and limited flexibility. Latin American petrochemical producers, for example, were already struggling with a downcycle when new U.S. tariffs arrived. Without the ability to pivot to other markets or shore up cash reserves, even well-capitalized companies needed government support.

The Bottom Line:

Global trade isn't dying—it's evolving into something more regional, more diversified, and potentially more resilient. The companies thriving in this new paradigm aren't necessarily the biggest or most efficient. They're the ones with options.

Adapted from: Franklin Templeton Fixed Income. (2025, October). EM corporates—Quarterly outlook: Rising global uncertainties and idiosyncratic risks. Franklin Templeton

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