WTO warns of global trade decline amid US tariff war

WTO economists on Wednesday updated their projections for 2025, noting a “substantial downgrade” to the forecast for merchandise trade and a smaller reduction in their outlook for services trade.

Much of the change was driven by new estimates for North America, which is now is projected to see a 12.6 percent decline in exports and 9.6 percent drop in imports this year.

“Our simulations show that trade policy uncertainty has a significant dampening effect on trade flows, reducing exports and weakening economic activity,” Ralph Ossa, WTO chief economist, said in a statement.

“Moreover, tariffs are a policy lever with wide-ranging, and often unintended consequences. In a world of growing trade tensions, a clear-eyed view of those trade-offs is more important than ever.”

Trump has paused the massive taxes on imports from most countries that he initially proposed April 3, but he has escalated retaliatory action against China, levying 145 percent tariffs on most goods.

Trump has also launched other tariffs on Mexico and Canada.

The WTO estimates that the volume of world merchandise trade will fall 0.2 percent in 2025 under current conditions — nearly 3 points lower than expected under a “low tariff” baseline scenario.

Trade could shrink to negative 1.5 percent in 2025 if the Trump administration’s suspended “reciprocal tariffs” take effect, the economists estimate.

Services trade, though not directly subject to tariffs, also will not meet initial projections, the WTO warned, with the global volume now forecast to grow 4 percent slower than initial estimates.

The WTO predicted at the start of the year that world trade would continue its expansion in 2025 and 2026, with merchandise trade growing in line with world gross domestic product estimates and commercial services trade increasing at a faster pace.

The organization recently reassessed the trade outlook because of the drastic tariff changes that Trump has plotted.

“I am deeply concerned by the uncertainty surrounding trade policy, including the US-China stand-off,” WTO Director-General Ngozi Okonjo-Iweala stated in a statement.

“The recent de-escalation of tariff tensions has temporarily relieved some of the pressure on global trade. However, the enduring uncertainty threatens to act as a brake on global growth, with severe negative consequences for the world, the most vulnerable economies in particular.”

“In the face of this crisis, WTO members have the unprecedented opportunity to inject dynamism into the organization, foster a level-playing field, streamline decision-making, and adapt our agreements to better meet today’s global realities,” she added.