APEC - The New Connections Driving Trade

APEC’s Robust Economic Standing: APEC continues to solidify its position as a vital economic and trade grouping, with its share of global GDP steadily increasing and attracting significant foreign direct investment, reflecting its growing influence in the world economy. 

Geopolitical Reordering of Trade: Trade relations within APEC are undergoing a significant realignment driven by geopolitical factors. This includes strategies like “China +1” and a visible diversification of supply chains, signaling a shift away from singular dependencies.

Emergence of “Connector Economies”: Certain “connector economies” like Vietnam, Thailand, and Mexico are becoming crucial intermediaries in U.S.-China trade, enhancing supply chain resilience despite increasing geopolitical complexities.

Technology-Driven Export Growth: Integrated circuits (fueled by AI demand), electric vehicles, gold, and energy are identified as the primary drivers of export growth across APEC, with the region holding a dominant position in the global 
electric vehicle value chain.

Accelerated Digitalization of Services Trade: Accelerated Digitalization of Services Trade: In contrast to the stagnation in goods trade, services trade, especially digitally delivered services, is experiencing rapid growth, largely propelled by technological advancements and the facilitative role of Artificial Intelligence.

Substantial AI Investment: Significant private capital is being invested in advanced technologies across APEC, with generative AI, large language models, and NFTs attracting the largest shares. The U.S. currently leads substantially 
in private AI investment.

Impact of U.S. Trade Policy Uncertainty: Anticipation and implementation of U.S. tariff policies are causing notable shifts in trade flows and supply chain configurations, impacting the value and volume of goods shipped between APEC members and the U.S.

China’s Leadership in Clean Technology: China’s considerable investments in clean technologies such as solar, batteries, and electric vehicles are accelerating global adoption, influencing trade and investment patterns, and posing challenges to traditional manufacturing sectors in other APEC economies.