The World Trade Organization said global merchandise trade is performing far better than expected earlier this year, with artificial intelligence driving demand growth while trade fragmentation between geopolitical rivals stabilizes.

The Geneva-based WTO said in a report on Thursday that it expects global goods trade to grow 3.9% this year, a sharp upward revision from its March forecast of 1.9%. In the first half of 2026, AI-enabled products accounted for 47% of the growth in goods trade.

The WTO said: "Although disruptions to fuel and fertilizer shipments could keep commodity prices persistently high, continued growth in AI investment and broader digitalization of the global economy are expected to keep merchandise trade growth above global GDP growth in 2027."

However, rising energy costs are weighing on services trade. The WTO cut its forecast for services trade growth this year to 3.3% from 4.8% six months ago, with higher fuel costs acting as a drag on tourism.

For 2027, the WTO expects goods trade to grow 4.1% and services trade to grow 6.4%. Combined, global trade is projected to grow 4.7% next year, compared with 3.7% this year.