The World Trade Organization (WTO) warned on Wednesday that global trade prospects have “deteriorated sharply” following US President Donald Trump’s tariff regime, according to CNBC.
“The outlook for global trade has deteriorated sharply due to rising tariffs and trade policy uncertainty,” the WTO said in its latest “World Trade Prospects and Statistics” report released Wednesday.
Based on current tariffs, including a 90-day suspension of “reciprocal tariffs,” global merchandise trade volume is now expected to decline by 0.2% in 2025, before recording a “modest” 2.5% recovery in 2026.
The decline is expected to be particularly severe in North America, where exports are expected to fall by 12.6% this year.
The World Trade Organization (WTO) also warned of “significant downside risks,” including the implementation of “reciprocal” tariffs and wider political uncertainty, “which could lead to a sharp decline of 1.5% in world merchandise trade,” particularly damaging to export-dependent least developed countries.
The WTO reported that the recent tariff disruptions come on the heels of a strong year for global trade in 2024, with merchandise trade growing by 2.9% and commercial services trade expanding by 6.8%.
The report added that the new estimate of a 0.2% decline in global trade for 2025 is about three percentage points lower than projected under the “low tariffs” scenario and represents a significant reversal from the beginning of the year when WTO economists expected continued trade expansion supported by improved macroeconomic conditions.
It stated that “risks to the outlook include the implementation of currently suspended reciprocal tariffs by the United States, as well as a broader extension of trade policy uncertainty beyond trade relations associated with the United States.”
“If implemented, the reciprocal tariffs would reduce global merchandise trade growth by an additional 0.6%, posing particular risks to least developed countries, while widespread trade policy uncertainty would reduce global merchandise trade growth by an additional 0.8%.
Taking these risks together, reciprocal tariffs and widespread trade policy uncertainty would lead to a 1.5% decline in global merchandise trade volume in 2025.”
Trump surprised his trading partners and global markets in early April when he announced a series of “reciprocal” tariffs on imports from more than 180 countries. Beijing was the hardest hit, with total U.S. tariffs on Chinese imports effectively reaching 145%. China, in turn, retaliated against Washington with retaliatory tariffs of up to 125% on U.S. imports.
The widespread market turmoil that followed the tariff announcement prompted Trump to temporarily reverse his decision, with the president announcing last week that the new tariffs on imports from Most trading partners will see their tariffs reduced to 10% for 90 days to allow for trade negotiations with their counterparts in Washington.
The World Trade Organization (WTO) reported in its report released Wednesday that the impact of recent trade policy changes is likely to vary sharply from region to region.
In the revised forecast, North America now accounts for 1.7% of global merchandise trade growth in 2025, making the overall figure negative.
Meanwhile, Asia and Europe continue to contribute positively, but less than in the baseline scenario, with Asia's contribution halved to 0.6 percentage points.
The WTO added that the disruption to US-China trade is expected to lead to "significant trade rerouting," raising concerns among third markets about increased competition from China.
Chinese goods exports are expected to rise by 4% to 9% in all regions outside North America with the rerouting of trade.
At the same time, US imports from China are expected to decline sharply in sectors such as textiles, clothing, and electrical equipment, creating new export opportunities for other suppliers able to fill the gap, according to the World Trade Organization, noting that this could open the door for some less developed countries to increase their exports to the US market.
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