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The Impact of War on Trade

OPINION: By Tatenda Machirori

Organizations that rely on donor funding fully understand the effects of war on their activities. During war, donor funding is often redirected to “war zones” to ensure there is sufficient food and resources for those affected. However, the impact of war on trade tends to have a more global effect and influences how businesses conduct their operations. It has been reported that when a country shifts its economy to a wartime footing, the exports of industrial products can decline. These export products are typically exchanged with colonial products, and a decrease in exports results in reduced export revenues for the country. Additionally, war can reduce trade not only between the warring countries but also with the rest of the world. For example, since the Russia-Ukraine conflict began, Russia’s exports of gas to Europe have fallen by about 35% (European Central Bank: Ecosystem). Russia’s imports have also decreased, partly due to sanctions from Western and Asian countries.

The Russia-Ukraine conflict has led to significant trade diversion for Russia, with the nation benefiting from increased exports of mineral oil and gas to Europe and Asia. Similarly, conflicts such as the Gaza War have had significant impacts on trade globally. They have disrupted trade routes, created geopolitical tensions, and affected global markets. The ongoing conflict between Russia and Ukraine has led to political and economic instability in the region. The annexation of Crimea by Russia in 2014 and the ongoing separatist movement in Eastern Ukraine have strained relations between the two countries and their trading partners. The imposition of sanctions by Western countries on Russia has directly impacted trade flows and investment in the region, targeting specific Russian industries, including energy, finance, and defense, leading to a significant reduction in trade volume between Russia and its traditional trading partners.

Furthermore, the conflict has disrupted transportation routes and infrastructure, particularly in Eastern Ukraine, affecting the movement of goods and services. The uncertainty surrounding the conflict has also made it challenging for businesses to make long-term investment decisions, leading to a decline in foreign direct investment in the region. This has had a ripple effect on global supply chains and trade patterns, as companies seek alternative sources and routes to mitigate the risks associated with the conflict.

The Gaza War, characterized by recurring escalations of violence between Israel and Hamas, has also had far-reaching implications for trade in the region. The conflict has resulted in the destruction of critical infrastructure, including ports, roads, and warehouses, severely disrupting the movement of goods and services in and out of the Gaza Strip. The blockade imposed by Israel on the Gaza Strip has further restricted trade, making it difficult for businesses to import raw materials and export finished goods. Moreover, the frequent closures of border crossings and checkpoints have hindered the flow of goods between Israel and the Palestinian territories, leading to significant delays and increased costs for traders.

The volatile nature of the conflict has also made it challenging for businesses to operate in the region, leading to a decline in investment and economic activity. The impact of these conflicts on trade extends beyond the immediate regions involved. The geopolitical tensions and uncertainty created by these conflicts have affected global markets and trade routes. The disruption of trade flows in key strategic regions has led to increased transportation costs and delays, impacting the competitiveness of businesses operating in these regions.

Furthermore, the imposition of sanctions and trade restrictions by various countries in response to these conflicts has led to trade diversion, as countries seek alternative trading partners and supply chains to minimize the impact of the disruptions. This has resulted in a restructuring of global trade patterns, with some countries benefiting from the reconfiguration of supply chains, while others face increased costs and reduced market access.

Additionally, the conflicts have contributed to global energy security concerns, especially in the case of the Russia-Ukraine conflict. The reliance of European countries on Russian natural gas exports has been the subject of debate, leading to efforts to diversify energy sources and routes to reduce dependence on Russian energy supplies. This has implications for global energy markets and trade, as countries seek to secure alternative sources of energy and invest in infrastructure to facilitate energy diversification.

The impact of war on trade is not limited to specific regions, and Africa has also experienced its effects. Armed conflicts in various African countries have significantly disrupted trade and economic activities in the region. In countries such as South Sudan, the Democratic Republic of Congo, and Somalia, ongoing conflicts have led to the destruction of infrastructure, including roads, ports, and warehouses, which are essential for facilitating trade.

The volatile security situation in conflict-affected areas has made it challenging for businesses to operate and transport goods. As a result, the movement of goods and services within and across borders has been severely hampered, leading to increased costs, delays, and reduced trade volumes. Additionally, the lack of security and stability in these regions has deterred foreign investment and hindered the development of trade partnerships and collaborations.

In conclusion, the conflicts between Russia and Ukraine, as well as the Gaza War, have had profound impacts on trade around the world, disrupting trade routes, creating geopolitical tensions, and affecting global markets and supply chains. The resulting uncertainty has made it challenging for businesses to operate in these regions, leading to a decline in trade volume and investment. The ripple effects of these conflicts have been felt across the global economy, leading to trade diversion, increased transportation costs, and energy security concerns. As these conflicts continue to evolve, it is essential for policymakers, businesses, and international organizations to work towards peaceful resolutions to mitigate the long-term impacts on global trade and economic stability.

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