Global trade will decline in 2023 by about 5% from last year’s record as high borrowing costs weigh on economies, US-China tensions redirect supply chains and more policies restricting cross-border commerce emerge, a UN agency said.

The value of goods and services trade will reach $30.7 trillion compared with $32.2 trillion in 2022, according to the Geneva-based United Nations Conference on Trade and Development. A $2 trillion, or 8%, slump in merchandise trade is the main reason. Services trade this year will increase by $500 billion, or about 7%, from a year ago, UNCTAD said in a report Monday.

Lower costs for goods affected by high inflation a year ago is also a reason for the decline. “Even though the value of traded goods decreased in 2023, the slightly positive trend in the volume of international trade suggests a resilient global demand for imported products,” the report said.

UNCTAD noted how countries aligned geopolitically are trading more with each other while those in disagreement are trading less bilaterally. That divergence among several issues clouding the outlook for next year, the agency said.

“The forecast for global trade remains highly uncertain and generally pessimistic,” the report said. “While certain economic indicators hint at potential improvements, persistent geopolitical tensions, high levels of debt, and widespread economic fragility are anticipated to exert negative influences on global trade patterns.”