Executive Summary
Trade policy uncertainty (TPU) has increased by 125% since 2019, according to the WTO’s World Trade Report. The forces driving this surge are structural, not cyclical: geopolitical fragmentation, the return of industrial policy, carbon border mechanisms, and technology export controls are reshaping the global trading system in ways that affect businesses of every size.
This report examines five major trends, quantifies their impact on market entry friction, and explains how companies can use real-time data to stay ahead of the curve rather than reacting to changes after they hit the P&L.
Trend 1: The 125x Uncertainty Factor
The WTO’s Trade Policy Uncertainty Index, which tracks the frequency and magnitude of trade policy changes across member states, has reached its highest levels since the index began in 1995. The 125% increase since 2019 is not a single spike—it represents a sustained upward shift driven by multiple compounding factors.
For businesses, elevated TPU translates directly into higher costs of planning. When tariff schedules, licensing requirements, and compliance rules can change within a single quarter, the lead time for market entry decisions shrinks while the risk premium expands. Companies that relied on annual snapshots from reports like the World Bank Doing Business ranking find themselves operating on stale intelligence.
Trend 2: Tariff Escalation Beyond US-China
While the US-China tariff war remains the most visible trade conflict, tariff escalation has spread far beyond the original bilateral dispute. The average applied MFN tariff rate across G20 economies rose from 5.2% in 2019 to 7.1% in 2024—a level not seen since 2010.
Key developments include:
- Section 301 tariffs on Chinese goods remain in effect and have been expanded to cover semiconductors, EVs, batteries, and critical minerals.
- EU anti-dumping actions against Chinese steel, solar panels, and electric vehicles, with provisional duties of up to 38.1%.
- India’s tariff increases on electronics, chemicals, and agricultural products as part of its “Make in India” strategy.
- African Continental Free Trade Area (AfCFTA) delays, with member states maintaining higher external tariffs than originally planned.
On Nexus, these changes surface as shifts in the Economic friction dimension for affected countries. Companies with watchlist alerts configured for economic dimension changes receive notifications within 24 hours of a score shift.
Trend 3: Carbon Border Adjustment Mechanisms
The EU’s Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in October 2023 and will begin charging importers on embedded emissions starting January 2026. The UK has announced a similar mechanism effective January 2027. Australia, Canada, and Japan are in various stages of evaluation.
CBAM represents a fundamentally new type of trade friction: a compliance burden tied to production processes rather than product characteristics. Exporters of steel, aluminum, cement, fertilizers, electricity, and hydrogen to the EU must now track and report emissions data at the installation level—a requirement that many developing-country producers are not equipped to meet.
From a friction scoring perspective, CBAM increases both the Economic dimension (direct cost impact) and the Legal dimension (compliance and reporting requirements) for high-emitting export sectors. Nexus tracks CBAM-related regulatory changes through its news intelligence pipeline, flagging them under the “regulatory” and “trade” categories.
Trend 4: Technology Export Controls
Export controls on advanced technologies have expanded significantly since 2022. The US, EU, Japan, and Netherlands have implemented coordinated restrictions on semiconductor manufacturing equipment. The US Entity List has grown from 200 entries in 2019 to over 700 in 2024. China has responded with its own export controls on gallium, germanium, graphite, and rare earth processing technology.
For technology companies, these controls create a new layer of Legal friction that did not exist five years ago. Market entry into China, Russia, Iran, and an expanding list of restricted destinations now requires export license evaluation that can add months to deal timelines.
Trend 5: Sanctions Proliferation
The number of active sanctions programs has expanded dramatically. OFAC, the EU, and the UK collectively maintain sanctions against individuals and entities in over 40 countries. Nexus tracks three major sanctions regimes (OFAC, EU, UK) and aggregates entity-level data into per-country sanctions summaries that feed into the Political and Legal friction dimensions.
The proliferation of secondary sanctions—where third-country companies face penalties for dealing with sanctioned entities—has made compliance more complex. Companies expanding into markets adjacent to sanctioned economies (such as Turkey, the UAE, or Central Asian states) face elevated scrutiny and should factor sanctions risk into their market entry analysis.
How to Track These Changes
The fundamental problem with trade policy uncertainty is that it is uncertain—by definition, you cannot predict exactly what will change or when. But you can build systems that detect changes quickly and alert you before they become business-critical problems.
Nexus provides several tools for this:
- Real-time market shift feeds. The dashboard surfaces detected score changes across all 195 countries as they happen, categorized by dimension and magnitude.
- Watchlist alerts. Configure threshold-based alerts for specific countries and dimensions. Get notified when economic or legal friction scores move beyond your tolerance.
- News intelligence. Nexus aggregates trade, regulatory, and sanctions news from 13 sources, auto-tagged by country, dimension, and sentiment.
- What-if simulations. Model the impact of a hypothetical tariff increase or regulatory change on your target market’s friction score before it happens.
- Newsletters. Weekly and monthly digests summarize score changes, top news, and new sanctions for your watched countries.
Conclusion
The 125% surge in trade policy uncertainty is not a temporary disruption. It reflects a structural shift in the global trading system toward more fragmentation, more conditionality, and more compliance complexity. Companies that treat international market intelligence as a one-time research exercise will increasingly be caught off guard.
The companies that thrive in this environment will be those that build continuous monitoring systems—tracking friction, not just opportunity—and making market entry decisions with real-time data rather than annual reports.
Nexus is built for exactly this purpose. Create a free account to explore friction scores, configure alerts, and run simulations for your target markets.