World trade entered 2026 on a strong trajectory, with Chinese exports surging over 20% year-over-year in January and February, global air cargo expanding by double digits, and seaborne cargo growing 5.3%. Much of this momentum stemmed from AI-related hardware—including servers and semiconductors—which accounted for roughly three-quarters of U.S. nominal import growth in 2025. However, military escalation in the Middle East abruptly reversed these gains by late February.
According to UN Trade and Development (UNCTAD), disruptions at the Strait of Hormuz—a critical global maritime choke point carrying approximately a quarter of seaborne oil trade along with significant volumes of liquefied natural gas and fertilizer—have rendered the strait “practically closed.” Ship transits plummeted from an average of 129 per day in February to just six by late March, representing a near-95% decline. Brent crude prices have exceeded $90 per barrel since the escalation began, while tanker freight rates, marine fuel costs, and war-risk insurance premiums have all surged sharply.
These disruptions have triggered significant revisions to global trade forecasts. UNCTAD now projects world merchandise trade growth will fall from 4.7% in 2025 to under 2.5% in 2026—a potential cut of one-half. The agency’s 2026 global GDP forecast stands at 2.6%, with developed economies expected to grow only 1.5% and developing economies 4.1%. The World Bank similarly forecasts global growth slowing to 2.5% for 2026, while the Organization for Economic Cooperation and Development identifies the “energy supply shock from the evolving conflict in the Middle East” as actively testing global economic resilience, projecting G20 inflation at 4.0% for the year.
This post-World War II model of finished products originating from complex global supply chains diverges fundamentally from the original “American System,” as Henry Clay described in the 1840s, when the United States produced the overwhelming majority of its goods domestically. The British historically resented this titanic productive capacity and were concerned about the “balance of trade” implications. English economist Frederick Soddy voiced these anxieties in the 1920s, noting that America could supply almost all global needs without extensive imports—a phenomenon he termed “insoluble.” This created a gold flow into the United States, which the British found unfavorable. Soddy wrote: “When one contemplates a country like the United States, which it has been computed could easily supply almost the entire wants of the whole world without over-exerting herself… the problem looks frankly insoluble.”
The British response was to encourage U.S. reliance on imports, metaphorically shifting gold from American piggy banks into international trade corridors under their influence. Today, the 21st-century economic model—forged with input from British economists like John Maynard Keynes—is unraveling, compelling America to reconsider domestic production once again. At the World Economic Forum, U.S. Commerce Secretary Howard Lutnick underscored this shift, stating: “Globalization has failed the West and the United States of America.” He added, “It is what the WEF has stood for—export, offshore, far-shore, find the cheapest labor in the world—and the world is a better place for it. The fact is, it has left America behind.” Lutnick framed “America First” not as retreat but as an alternative model prioritizing domestic industry, border control, and national sovereignty over dependence on interconnected global supply chains.
