Where are the ‘choke points’ in global trade – and can they be overcome?
News Summary
Allianz Trade predicts global trade growth will slow by 0.6% in 2026, driven by deep tariff cuts and major route congestion. Despite a US$500 billion expansion in global trade value in the first half of 2025, countries are forging new economic pathways in response to rapid geopolitical shifts, heightened protectionism, and climate change-induced extreme weather events. The Allianz Trade report indicates that year-on-year global growth of goods and services trade is set to slow to 0.6% and 1.8% in 2026 and 2027 respectively, a decline from the 2% observed for 2025 so far. This highlights the delayed impact of trade wars and the limitations of current trade infrastructure. The report identifies the Suez and Panama canals as top high-risk “choke points” among traditional routes, which carry 50-60% of global merchandise trade, constrained by congestion and limited redundancy. According to Ana Boata, head of economic research at Allianz, geopolitics has now taken primacy over oil prices as the main driver of container freight rates, which was the case before the COVID-19 pandemic. Asian and European hubs face increasing political or climate shocks, American hubs have high reliability but tightening capacity along Atlantic and Gulf coasts, and midway hubs from the Middle East to Southern Africa remain vulnerable to political and environmental stress.
Background
The global trade system is undergoing profound changes, with supply chain resilience, rather than pure efficiency, becoming a primary consideration due to escalating geopolitical tensions, heightened great power competition, and protectionist policies like
In-Depth AI Insights
How has the strategic significance of global trade 'choke points' transformed under the current Trump administration's protectionist policies? - These 'choke points' are no longer merely logistical efficiency bottlenecks but have become strategic bargaining chips in geopolitical contests. For instance, controlling or disrupting passage through the Suez or Panama canals could be used as leverage against trade partners or as a means to counter specific alliances, especially as the U.S. seeks to reshape global trade dynamics. - Investors need to reassess the risk exposure of companies heavily reliant on single or few critical shipping lanes. For shipping companies, logistics providers, and manufacturers with extensive global supply chains, the uncertainty in operational costs and timelines will significantly increase. This could push more businesses towards investing in regionalized supply chains or increasing inventory levels to hedge against such risks. Given slowing trade growth and the vulnerability of 'choke points,' can the 'new economic pathways' being explored by nations and companies effectively mitigate existing problems? Where do investment opportunities lie? - 'New economic pathways' primarily involve supply chain diversification, regionalization, and nearshoring, alongside investment in alternative transport corridors like the Central Asian corridor or Arctic routes (though the latter faces climate limitations). These pathways aim to bypass the risks of traditional 'choke points' but often come with higher costs and longer establishment periods. - Investment opportunities exist in: 1) The development of alternative logistics infrastructure, including new ports, railway networks, and warehousing facilities; 2) Technology companies offering end-to-end supply chain resilience solutions (e.g., AI-driven logistics optimization, risk management platforms); 3) Manufacturing firms with production capabilities in geopolitically stable regions or those enabling nearshoring; 4) Funds or companies focused on intra-regional trade and economic integration. With climate change increasingly impacting global trade hubs, how will this shift infrastructure investment priorities and the risk models of the insurance industry? - Climate change will compel infrastructure investors to prioritize climate-resilient projects, such as fortifying ports against floods, constructing weather-resistant transport networks, and investing in renewable energy to reduce carbon footprint and operational risks. The traditionally efficiency-driven investment model will shift towards balancing resilience with sustainability. - The insurance industry will face higher payout risks and more complex model adjustments. Climate-related trade disruptions (e.g., port closures due to storms, drought impacting inland waterway transport) will become more common. This is likely to lead to increased premiums for trade credit insurance and marine cargo insurance, and will prompt insurers to develop new risk assessment tools and products, such as dynamic pricing insurance based on climate risk.