Cargo vessels and containers at the port of Qingdao in eastern China’s Shandong province on December 4, 2024.
Stringer | Afp | Getty Images
The World Trade Organization (WTO) issued a warning on Wednesday stating that the forecast for global trade has “deteriorated sharply” following the tariff regime implemented by U.S. President Donald Trump.
“The outlook for global trade has sharply declined amid rising tariffs and uncertainties in trade policies,” the WTO indicated in its latest “Global Trade Outlook and Statistics” report released on Wednesday.
According to the present tariffs and the temporary 90-day suspension of “reciprocal tariffs,” the global merchandise trade volume is now predicted to decline by 0.2% in 2025, before experiencing a “modest” recovery of 2.5% in 2026.
The anticipated decline is expected to be particularly pronounced in North America, where exports are projected to decrease by 12.6% this year.
The WTO also expressed that “significant downside risks remain,” including the implementation of “reciprocal” tariffs and wider policy uncertainty, “which could result in an even sharper decline of 1.5% in global goods trade,” particularly affecting export-dependent, least-developed nations.
The recent tariff alterations come on the heels of a robust year for global trade in 2024, during which merchandise trade expanded by 2.9% and commercial services trade grew by 6.8%, as noted by the WTO.
The revised estimate of a 0.2% contraction in global trade for 2025 is nearly three percentage points lower than what would have been expected under a “low tariff” baseline scenario, according to the WTO, marking a significant turnaround from earlier in the year when the organization’s economists were optimistic about continued trade growth driven by improving macroeconomic conditions.
“Factors influencing the forecast include the potential implementation of the currently suspended reciprocal tariffs by the United States, as well as broader trade policy uncertainties extending beyond U.S.-related trade,” the WTO stated.
“If enacted, reciprocal tariffs could diminish global merchandise trade growth by an additional 0.6 percentage points, particularly impacting least-developed countries (LDCs), while an escalation of trade policy uncertainty (TPU) could further reduce it by 0.8 percentage points. Collectively, these factors could lead to a 1.5% decrease in global merchandise trade volume in 2025.”
U.S. President Donald Trump speaks about tariffs in the Rose Garden at the White House in Washington, D.C., on April 2, 2025.
Carlos Barria | Reuters
Trump shocked trading partners and global markets in early April by announcing a series of “reciprocal” tariffs on imports from over 180 countries. China suffered the most, with U.S. duties on Chinese imports now effectively reaching 145%. In retaliation, China imposed tariffs of up to 125% on U.S. imports.
The widespread market volatility that followed the tariff announcement prompted a temporary reversal by Trump, who last week revealed a reduction of new duties on imports from most trading partners to 10% for 90 days to facilitate trade negotiations with various counterparts.
The WTO reported that the effects of recent trade policy shifts are expected to vary significantly by region.
In the updated forecast, North America is now projected to detract 1.7 percentage points from global merchandise trade growth in 2025, resulting in an overall negative figure.
Asia and Europe, meanwhile, continue to contribute positively, though less than in the baseline scenario, with Asia’s contribution halved to 0.6 percentage points.
The disruption in U.S.-China trade is anticipated to “trigger considerable trade diversion,” the WTO added, raising concerns regarding increased competition from China in third markets.
“Chinese merchandise exports are expected to increase by 4% to 9% across all regions outside North America as trade is redirected. Concurrently, U.S. imports from China are projected to plummet in sectors like textiles, apparel, and electrical equipment, creating new export opportunities for other suppliers ready to fill the void,” the trade organization highlighted, suggesting that this may allow certain least-developed countries to enhance their exports to the U.S. market.
