How Global Trade in 2026 Will Reshape Europe’s Export Model

By Zoe Papakyriakou

Europe’s prosperity has long depended on open markets and global supply chains. Yet by 2026, that system will face its toughest test in decades. Tariffs, slowing world trade, and rising geopolitical tensions are forcing Europe to rethink how it trades and what it produces. The continent’s export model is not ending, but evolving. What emerges will define Europe’s next economic chapter.

The End of the Easy Trade Era

For decades, strong exports have been keeping Europe competitive and prosperous. However, the global economy is changing. The World Trade Organisation (WTO) projects that world merchandise trade growth will slow to about 0.5 per cent in 2026, the weakest in years, as new tariffs and supply-chain disruptions take effect. At the same time, the European Central Bank (ECB) expects euro-area GDP growth to fall to roughly one per cent in 2026, with inflation easing to 1.7 per cent.

The abovementioned figures mark a turning point: trade will no longer drive Europe’s recovery as it once did. Instead, innovation, investment, and regional cooperation must fill the gap. The era of effortless globalisation is coming to an end.

The Numbers Behind the Slowdown

The WTO notes that 2025 saw a temporary surge in shipments as firms front-loaded exports before new tariffs came into force, but that effect is predicted to fade in 2026. Analysts at the Global Trade Review report that global trade will “feel the tariff hit” next year, as protectionist measures from both the U.S. and China spread through global value chains. 

Private forecasts further agree. Allianz Trade expects weak European growth through 2026 as exports stall, while Oxford Economics warns that “tariffs will still bite”, restraining recovery even as inflation fades.

It is important to mention that not every sector is equally exposed. The WTO predicts that global trade in services will expand by about four per cent in 2026, led by digital and business services, while traditional goods like cars and chemicals will fall behind. High-tech products related to artificial intelligence and semiconductors are among the few categories that are expected to grow. 

Why Europe’s Export Model is Under Pressure

Europe remains one of the most trade-dependent regions in the world. Economies such as Germany and the Netherlands rely highly on exports of machinery, vehicles, and chemicals. When global demand slows, these industries will be the ones that will feel it first.

According to the ECB's forecast, foreign demand for euro-area goods will rise by only 1.4 per cent in 2026, roughly half of its pre-pandemic pace. Europe’s cost advantage has further been eroded by rising energy prices and stricter environmental rules. Moreover, the Austrian Institute of Economic Research (WIFO) expects a “slight recovery” in 2026 after a heavily disappointing 2025. For the Netherlands, one of Europe’s top trading hubs, the weaker container traffic through Rotterdam already signals slower momentum. Still, Dutch strengths in semiconductors, agri-tech, and digital services could help shield the downturn. In short, Europe’s trade model is not collapsing, but shifting toward smaller volumes and higher value. 

The Move Toward Regional and Secure Trade

European leaders are now re-evaluating their approach to globalisation. Chatham’s House Global Trade Conference for 2026 highlights a world where economic security outweighs pure openness. Similarly, the Bruegel Institute urges the EU to coordinate trade, industrial, and competition policy so that resilience and efficiency are able to reinforce each other. This new way of thinking is already visible. The European Chips Act, Net-Zero Industry Act, and Carbon Border Adjustment Mechanism (CBAM) all aim to strengthen Europe’s industrial base and reduce dependence on imports from geopolitical rivals. Furthermore, companies have also been relocating production closer to home.

Such a combination of steps raises short-term costs but improves long-term security. The ECB’s baseline scenario assumes that trade intensity will remain toned down in 2026 before recovering gradually as these new regional networks start maturing.

Who Wins and Who Loses in 2026

Not every part of Europe’s economy will suffer equally from the slowdown in global trade. Firstly, high-tech industries and digital industries continue to expand despite weaker global conditions. Secondly, green and defence-related sectors are also likely to gain momentum as governments boost public investment and pursue greater strategic autonomy. Moreover, logistics and professional services hubs are positioned to benefit from the re-routed supply chains and the growing importance of regional efficiency. These aforementioned sectors reflect the parts of Europe that are best able to adapt to the new economic realities driven mainly by technology, sustainability, and regional trade. 

Conversely, several industries face rising challenges. Low-margin manufacturers that depend on cheap imports or single-market buyers are likely to be squeezed by higher costs and limited flexibility. Additionally, traditional exporters, like automotive suppliers, will struggle with declining foreign demand and tougher environmental standards that raise production costs. Likewise, regions lacking strong service or technology bases risk being left behind as the global shift towards digital and knowledge-driven sectors continues to accelerate. As Allianz Trade notes, Europe’s goal should not be to export less but to export smarter, always with a focus on innovation, advanced technology, and sustainable value creation.

What Europe Should Do Next

To stay competitive, Europe must both protect itself from short-term shocks, while at the same time, prepare for long-term renewal. Firstly, the EU should apply industrial policy with greater discipline, supporting key sectors while avoiding wasteful subsidy competition among member states. Secondly, Europe needs sustained investment in infrastructure and skills, starting from modern ports and greener energy grids, going all the way to digital connectivity and re-skilling programmes that will help workers move into high-value industries. Finally, the continent must diversify its trade partners, looking far beyond the United States and China to emerging markets in Southeast Asia, Africa, and Latin America. If managed wisely, these steps could transform a temporary shadow into an opportunity for strategic renewal, turning 2026 from a year of adjustment into the start of a more resilient European economy. 

Conclusion

The outlook for 2026 is challenging. Both the WTO and ECB foresee weak foreign demand, while Oxford Economics and Allianz trade warn that tariffs and trade frictions will persist. Yet Europe is not powerless. Its export model continues to evolve and is becoming more regional, more digital, and way more strategic. If the continent can align policy and industry around that vision, 2026 may be remembered not as the year globalisation failed, but as the year Europe learned to compete in a new kind of world economy. 

Sources: World Trade Organisation, Oxford Economics, WIFO, Bruegel, Global Trade Review, Allianz Trade, Chatham House, European Central Bank, The Collector

Written by Zoe Papakyriakou

Edited by Sarah Valkenburg and Nina Gush