Geopolitics and the geometry of global trade: 2026 update
Geopolitics and the geometry of global trade: 2026 update
https://www.mckinsey.com/mgi/our-research/geopolitics-and-the-geometry-of-global-trade-2026-update
By
Tariff splashes, AI waves, and the ripples reshaping global trade.
Chapter 2.
United States: AI and tariffs reshape trade
On the face of it, the trade surprise of 2025 was the strength of US foreign demand, which became the largest contributor to global import growth even as new tariffs took effect and shipments from China fell.
Yet most of this change reflected rushed buying ahead of tariff increases rather than a sustained increase in demand. Frontloading of pharmaceuticals and gold caused large swings in the trade balance, with the deficit widening in the first part of the year as firms stockpiled imports and then narrowing later as inventories were drawn down and gold was re-exported. Excluding these effects, both imports and the trade deficit were little changed compared to the prior year.
Beneath this stability, however, the composition of US trade shifted markedly. Purchases of AI-related goods rose sharply, while imports from China continued to fall as firms rerouted supply chains toward alternative suppliers, particularly in ASEAN economies (Exhibit 9).
Exhibit 9
A multi-panel line chart shows US imports and exports in 2017–25, and in 2024–25, monthly detail, plus line charts of trade partner shares and a table of share changes. From 2024 to 2025, the US import share from China fell about 4.4 percentage points, while shares rose for ASEAN (+2.5 pp) and the rest of Asia–Pacific (+2.4 pp); export shares rose for Europe (+3.7 pp) while China fell (−2.1 pp). Takeaway: The United States expanded trade in 2025, but the composition shifted meaningfully away from China toward other suppliers and markets.
The United States stockpiles imports amid tariff uncertainty
Promises, and then announcements, of much higher tariffs were the first salvo of change. An immediate and significant impact was frontloading, but it proved short-lived.
As the risk of higher tariffs rose in early 2025, US firms began stockpiling goods. For many consumer products, from air conditioners to wristwatches and cars, firms pulled forward purchases to avoid tariffs. By the end of the year, however, total imports remained broadly in line with normal annual demand: The timing shifted, not the overall value (see sidebar “US frontloading”).
For a narrow set of products, by contrast, frontloading increased full-year import totals. High-value, easily stored pharmaceutical ingredients, particularly those used in GLP-1-type weight-loss drugs, saw a surge, largely from Ireland. Gold imports from Switzerland, the United Kingdom, and Australia also spiked, as traders exploited widening price spreads amid tariff uncertainty. In both cases, tariffs never materialized, but the risk alone was enough to trigger defensive buying.
These shifts generated sharp intra-year swings in the trade balance. The deficit rose to 70 percent above 2024 levels in the first quarter before narrowing through midyear as frontloading subsided. By the fourth quarter, it stood 25 percent below year-earlier levels as traders unwound positions and re-exported the bullion, refilling vaults overseas. On a full-year basis, the deficit changed little.
In total, we estimate that about $130 billion of the $150 billion increase in US imports in 2025 reflected purchases pulled forward beyond a typical year’s demand. The surge in pharmaceuticals and gold, along with subsequent re-exports, accounted for roughly 80 percent of total import and export growth, a distortion unlikely to recur.
New suppliers replace imports from China
US tariffs and other trade restrictions hit China hardest, and it appears that the impact on US–China trade will persist. Although many US firms had been shifting a greater share of their sourcing from China to other Asian suppliers since 2017, the shock in 2025 forced an even faster adjustment. US imports from China fell by about $130 billion, almost triple the decline in either of the prior two years. Imports from alternative suppliers replaced about two-thirds of the gap, leaving a net decline of about $50 billion.
The extent to which firms found substitutes varied widely by product. Sourcing was largely replaced in high-value consumer electronics, particularly when producers could move later stages of production without rebuilding entire supply chains. Smartphones, laptops, and other devices were largely substituted by relocating final assembly to Asian economies, particularly India, Vietnam, and Thailand. The key components for these products continued to come from established suppliers, including processors from Taiwan, memory chips from South Korea, and a wide range of other parts primarily from Mainland China (Exhibit 10). This shift, however, led to cost increases; for example, laptops sourced from ASEAN economies were on average 20 percent more expensive than those previously sourced from China.
Exhibit 10
A variable-width bar chart (Marimekko-style) shows, by product, what share of the 2024–25 decline in United States imports from China was replaced by imports from other suppliers, across the dollar size of the decline. The US replaced nearly all lost smartphone imports (about $20 billion), while only about 60 percent of headphone imports were replaced, and a long tail of roughly $25 billion in products saw little to no replacement. Takeaway: Diversification away from China was strongest in high-value electronics and AI-related categories, but uneven across the broader goods basket.
Goods tied to data center construction, including servers, computer parts and cooling equipment, also saw high replacement levels. China had been a relatively small supplier of these products to begin with.
By contrast, replacement proved more limited in lower-value products such as toys and household furnishings, where creating alternative supply chains using existing inputs was less feasible—or profitable. In some cases, inventories carried over from prior years may have been sufficient to meet ongoing consumer demand; in others, firms may have substituted similar products instead. There is limited evidence that ramped-up domestic manufacturing replaced a meaningful share of these imports.
Imports of AI-related goods surge
Separate from tariff-driven activity, AI infrastructure emerged as a structural driver of US trade growth. Imports of AI-related goods rose by about $180 billion in 2025. These purchases included advanced logic chips from Taiwan as well as servers and networking equipment—inputs required to build data centers—from parts of ASEAN.
The buildout also required increased shipments of supporting infrastructure, including gas turbines for power generation, HVAC systems for cooling, and fiber-optic cabling for connectivity. Demand for all these inputs is likely to remain elevated, given data center construction plans.
Underlying US imports remained steady
Looking at overall imports, material shifts in composition largely offset one another. Gains in AI-related imports were almost exactly counterbalanced by declines in goods previously sourced from China, alongside lower purchases of fossil fuels and automobiles (Exhibit 11). Excluding frontloading, US imports grew by less than half a percent in nominal terms, slower than the overall economy.
Exhibit 11
A waterfall chart decomposes the change in US goods imports from 2024 to 2025 into AI-related goods, China-related effects, and tariff-related frontloading. Imports rose from about $3,266 billion to $3,416 billion, but excluding frontloading (+$131 billion), the increase was small (to about $3,285 billion) because AI-related gains (+$180 billion) were offset by declines from China (−$130B) and other sectors (−$114B) even after replacement imports (+$83 billion). Takeaway: the headline import increase in 2025 was driven by AI demand and tariff-driven stockpiling rather than broad-based underlying import growth.
The story for exports was similar. US exports grew by more than 5 percent in 2025 but increased by just 2 percent after excluding re-exports of frontloaded gold, well below overall US economic growth. Gains in liquefied natural gas and aircraft were roughly offset by declines in crude and soybean exports to China.
Trading partners reshuffle
In 2025, US imports rose from some partners and fell from others, reflecting the combination of forces at play in global trade and differences in export mix (Exhibit 12). Tariffs hit automobile and auto parts imports disproportionately, reducing trade with major exporters, such as Canada, Germany, Japan, and South Korea; auto exports from these economies to the United States fell by 10 to 20 percent. Inventories cushioned the impact on consumption even as domestic production didn’t increase.
Exhibit 12
A bubble-and-lollipop chart plots the percent change in US goods trade with the top 30 partners from 2024 to 2025, with circle size indicating 2024 trade value (scale shown at $100B). Partners tied to frontloading and AI—such as Switzerland and Taiwan—show large increases, while several ASEAN partners rise as replacements for China; China shows the largest decline. Takeaway: US trade shifts in 2025 were concentrated among a relatively small set of partners and were closely linked to frontloading, AI demand, and substitution away from China.
Oil imports also declined, primarily reflecting higher domestic production, with lower oil prices contributing. Canada, a major oil supplier, was therefore hit through both channels—autos and energy.
Trade grew most with partners tied to the year’s major shifts: Switzerland, Ireland, and Australia because of tariff-related frontloading; ASEAN economies and India replacing electronics previously sourced from Mainland China; and Taiwan reflecting strong demand for chips.
Despite the highest tariffs in nearly a century, the United States remained the world’s largest importer in 2025, but the mix of purchases and suppliers changed. Some shifts, such as frontloading, were temporary. Others, including AI-related purchases and substitution away from China, are likely to endure.
Hilton double majors in college-town hotels with Undergraduate launch
Upper-midscale hotel brand brings Graduate by Hilton vibes to more college towns
Undergraduate by Hilton is a new upper midscale lifestyle brand focusing on college markets. The rendering above depicts the front desk. (Hilton)
https://www.costar.com/article/945972623/hilton-double-majors-in-college-town-hotels-with-undergraduate-launch?
Hilton's 2024 acquisition of the Graduate Hotels brand helped spark a refreshed approach to lifestyle hotels for the company, and the latest stage of growth is an extension of that very brand.
Hilton has unveiled Undergraduate by Hilton, a new upper-midscale lifestyle hotel brand that similarly will target college markets, but ones often without the scale required for the larger Graduate by Hilton properties.
Kevin Osterhaus, Hilton's president of global lifestyle brands, said the difference between the two brands goes beyond the markets they will serve. Osterhaus joined Hilton from AJ Capital as part of the 2024 deal.
"There are certain flexibilities that come with an Undergraduate — proximity to campus might be one of those," he said. "The size of the market is something that certainly might differentiate between where a Graduate is based, either on the size of the university or the market, but I can see markets based on the dynamics where we would have both."
Undergraduate by Hilton is an acknowledgement that the appeal of the upper-upscale Graduate brand's particular type of hospitality extends beyond markets with major drivers such as SEC football and the need to provide a profitable model to owners in different types of hotels, Osterhaus said.
Hilton officials project the first Undergraduate hotel opening in 2027, although Osterhaus said deals for the new brand are still in the works. Ultimately, Hilton is targeting both new-build and conversion opportunities, with hopes of eventually opening as many as 500 properties, according to the news release announcing the new brand.
"We see huge, huge demand," he said. "The first thing we did was look to create as efficiently as possible a prototype, then figure out how to create something that could be localized."
He said the Undergraduate brand will also be flexible on adaptive reuse projects.
Key features of Undergraduate hotels will be social spaces designed to function like "an always-on, off-campus hangout" and all-day markets called the Super Seniors’ Snack Bar with grab-and-go options and a barista.
Undergraduate by Hilton is a new upper midscale lifestyle brand focusing on college markets. The rendering above depicts the market concept called Super Senior's Snack Bar. (Hilton)
Much like Graduate hotels, Undergraduate properties will be specifically designed with the school theme baked in and are meant to reflect the culture of the campuses they're connected to. Public spaces will be "library-inspired," and guest rooms will be meant to evoke "creative classrooms."
Osterhaus said the existing Graduate brand has inspired a unique type of guest loyalty, and extending that requires understanding the specific needs of travel to college towns.
"I think we're looking to build off that loyalty in a couple of different ways," he said. "This builds on the brand equity of Graduate Hotels; it builds on the success we've had with that platform. It builds on the loyalty that Graduate has as it relates to these university markets and these colleges while at the same time we're continuing to do something that has the consistency and engine of Hilton behind it. As we've seen with Graduate, that just continues to drive an entirely new or entirely different type of demand to these markets."
While colleges remain key to the identity of the brand, Osterhaus said it's often preferable to have markets with more diverse demand drivers, as college travel demand is often centered around a handful of major events, such as sports, graduations or move-ins.
In the spirit of the names of the two brands, Osterhaus said he thinks of Graduate as evoking a sense of nostalgia and looking back on a collegiate experience, while Undergraduate celebrates "discovering those things for the first time."
"We're working in these markets with owners to build some of those touchpoints into the offering," he said.
One of the key challenges for the new brand will be carrying over the lifestyle experience established by Graduate to a lower segment and price point, which Osterhaus said will boil down to "how we tell the story both in food and beverage and the guest room."
Undergraduate by Hilton is a new upper midscale lifestyle brand focusing on college markets. The rendering above depicts a guest room. (Hilton)
"We saw a white space to provide inventory that is creative, that has a dynamic component to it, done in a way that speaks to what we hope to accomplish in our lifestyle brands," he said.
This is Hilton’s third brand launch in seven months, following the outdoor-focused Outset Collection and the residential-focused Apartments Collection.
Hilton originally purchased the Graduate brand for $210 million, and has since grown its portfolio from 35 hotels either open or in development to nearly 60. The company plans to have roughly 700 lifestyle properties by 2028, and Hilton's overall portfolio today stands at over 1.3 million rooms across roughly 9,200 hotels.
Soft brands, conversions drive IHG Hotels & Resorts' growth in Caribbean, Latin America
Mexico may generate 50% of company's future expansion in region
IHG Hotels & Resorts has about 300 hotels open in the Caribbean and Latin America region, with another 100 in the pipeline in different stages of development. One of the properties it opened this year is the Garner Mazatlán Beach. (IHG Hotels & Resorts)
https://www.costar.com/article/1775490468/soft-brands-conversions-drive-ihg-hotels-resorts-growth-in-caribbean-latin-america
By Bryan Wroten
CORAL GABLES, Florida — As destinations around the Caribbean and Latin America continue keep growing in popularity, IHG Hotels & Resorts’ development team wants to capitalize on that, and Mexico tops the list.
In an interview during the Americas Lodging Investment Summit, CALA, Paul Adan, regional senior vice president of development for Mexico, Latin America, and the Caribbean region at IHG, said there’s growing demand by both travelers and hotel owners.
Currently, IHG has approximately 300 hotels open in the CALA region, with another 100 in the pipeline in different stages of development. Its pipeline for new leads has expanded since the company doubled its development team in the region over the past several years.
“We’re really taking advantage of the excitement for the region, for regional travelers, national travelers, international travelers,” Adan said.
IHG’s priority is Mexico; that’s where the company sees the most opportunities and may generate 50% of its growth, he said. The remaining half of the growth comes from the rest of the region, particularly in the Caribbean, namely Puerto Rico and the Dominican Republic. It’s also become active in Central America, and it’s seeing heavy growth in Brazil.
“We’re not focused only on one country,” he said. “We really want to have solid growth for the entire CALA region.”
IHG is able to provide a range of choices for travelers in the region, with luxury offerings such as Six Senses as well as select-service brands such as Holiday Inn Express, Avid, and Garner, one of its soft brands, Adan said. The company’s soft-brand and conversion-friendly brands have helped to drive growth in the region.
It signed two Vignette Collection properties in CALA last year, along with opening one in Peru, he said. IHG will open another later this year in the Dominican Republic.
The Voco brand brings the recognition that many owners want without having to create a new identity for the hotel, he said. It’s a hard brand with the flexibility of a soft brand.
“Last year, it was the brand that grew the most in the region,” he said. “We’ve done the most deals with that. Conversions are really our growth engine right now for development in the CALA region, and Voco is our rising star under that segment.”
It’s difficult to come up with financing for new projects in CALA, Adan said. There are a couple of countries where owners can get loans to develop hotels, and often they need to be part of mixed-use properties. A property with towers may have one as a hotel while the other is office space, or the project will include a branded residence component.
IHG is looking to grow its branded residences presence in CALA, he said. It’s focusing mainly on its Kimpton brand, but it also has deals in the works for its open and operating properties under the Regent, Six Senses, and InterContinental brands.
“We really are focusing our growth on the branded residence phase for luxury brands or entry-level luxury in the case of Kimpton,” he said.
In 2022, IHG signed a partnership with Spain-based Iberostar Hotels & Resorts for resorts and all-inclusive hotels in CALA, Europe, and Northern Africa. That immediately brought 25 resorts in CALA to IHG’s system, which has been growing since, Adan said.
The company recently opened an all-inclusive Voco property in Port St. Lucie, Florida. It has also signed a Voco all-inclusive property in Jamaica. It opened its first Kimpton all-inclusive resort in the Riviera Maya. It also has several Holiday Inn resorts in Mexico that offer all-inclusive packages, so there’s already recognition of this brand in the space which would allow further growth.
All this means that all-inclusive resorts are a big opportunity for IHG, he said.
Loyalty members "want those resorts, they want those experiences, so we really are putting a lot of effort into growing that,” he said.
IHG’s signing record in CALA grows each year, so there’s appetite from owners and developers, he said. Many of those interested are repeat owners who are coming back to add more IHG-branded properties to their portfolios.
“That's what we're shooting for, and that's really what I've been seeing over the last few years that I've been with IHG and what I measure our success by,” he said.
IHG has specialized team members in the different parts of CALA to know the markets and destinations to find the right opportunities in each location, Adan said.
“I would like to have all my brands present in all the markets,” he said. “The reality is that there are some markets that are more prone to certain brands, and what we always focus on when we make a decision is not simply on us having the IHG brand but on the return for the owner.”
By better knowing the market, IHG’s teams can make the proper recommendations, he said. All the owners want is the distribution system, a lower cost of doing business, and access to travelers from the U.S. and Europe. IHG, naturally, wants any of its 160 million loyalty program members going to a CALA destination to stay in one of its hotels.
“The hotel has to be the right one in each of those markets,” he said. “The demand is there. With 21 brands, we have the flexibility to be able to really have the right brand for each market and for the different opportunities.”
Helping make that happen is having franchise support teams based locally in each market to help the properties once they open, he said.
“It’s not simply bringing a U.S. mentality, a U.S. way of doing things and implementing them in the region,” he said. “It’s a very well-recognized global brand, but then providing the local support to the local hotels.”
DUHC&S | Strategic Hospitality Consulting & Advisory
We transform hospitality and tourism businesses through strategic solutions, operational efficiency, and comprehensive renovation. With over 40 years of experience working with brands like Hilton, Hyatt, Sheraton, and Sonesta, we enhance asset value and profitability through:
*Operational excellence and brand standards (GSI +90%)
*Market penetration and commercial strategies
*Key partnerships and disruptive innovation
*Hotel openings and repositioning
Proven results :
✅ 48% GOP |
✅ +120% asset valuation growth
✅ Successful projects across 6 Latin American countries
🔹 Let's connect :
📩 Email: diurugeles@gmail.com
📱 WhatsApp: +57 3153259968
Instagram: https://www.instagram.com/diur_2000/
https://viajes-noticias-duhospitality.blogspot.com
https://viajes-duhospitality.blogspot.com
https://travel-duhospitality.blogspot.com
Disclaimer
DUHC&S shares this information for educational and informational purposes only. The news articles reproduced here are sourced from public and recognized media outlets. We are not the original authors of this content but rather its distributors. All credits go to the original sources cited in each article. If you are the legitimate owner of any material and wish to have it modified or removed, please contact us immediately at diurugeles@gmail.com, and we will address your request promptly.
Comments
Post a Comment