WTO slashes 2025 trade growth forecast, warns of deeper slump
It says further US tariffs and spillover effects could lead to the heaviest slump since the height of the Covid pandemic
[GENEVA] The World Trade Organization sharply cut its forecast for global merchandise trade from solid growth to a decline on Wednesday (Apr 16), saying further US tariffs and spillover effects could lead to the heaviest slump since the height of the Covid pandemic.
The WTO said it expected trade in goods to fall by 0.2 per cent this year, down from its expectation in October of 3.0 per cent expansion. It said its new estimate was based on measures in place at the start of this week.
US President Donald Trump imposed extra duties on steel and car imports as well as more sweeping global tariffs before unexpectedly pausing higher duties on a dozen economies. His trade war with China has also intensified, with tit-for-tat exchanges pushing levies on each other’s imports beyond 100 per cent.
The WTO said that, if Trump reintroduced the full rates of his broader tariffs that would reduce goods trade growth by 0.6 percentage points, with another 0.8 point cut due to spillover effects beyond US-linked trade.
Taken together, this would lead to a 1.5 per cent decline, the steepest drop since 2020.
“The unprecedented nature of the recent trade policy shifts means that predictions should be interpreted with more caution than usual,” said the WTO, which is also forecasting a modest recovery of 2.5 per cent in 2026.
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Earlier on Wednesday, the UN Trade and Development (UNCTAD) agency said global economic growth could slow to 2.3 per cent as trade tensions and uncertainty drive a recessionary trend.
The Geneva-based WTO said disruption of US-China trade was expected to increase Chinese merchandise exports across all regions outside North America by between 4 per cent and 9 per cent.
Other countries would have opportunities to fill the gap in the United States in sectors such as textiles, clothing and electrical equipment.
Services trade, though not subject to tariffs, would also take a hit, the WTO said, by weakening demand related to goods trade such as transport and logistics. Broader uncertainty could dampen spending on travel and investment-related services.
The WTO said it expected commercial services trade to grow by 4.0 per cent in 2025 and 4.1 per cent in 2026, well below baseline projections of 5.1 per cent and 4.8 per cent.
The expected downturn follows a strong 2024, when the volume of world merchandise trade grew by 2.9 per cent and commercial services trade expanded by 6.8 per cent. REUTERS
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