The World Trade Organization (WTO) has raised alarms over the significant downturn in global trade, attributing the decline to the recent tariff measures imposed by the United States under President Donald Trump. These developments have introduced substantial uncertainty, posing potential “severe negative consequences” for the global economy, particularly affecting the most vulnerable nations.
Since his return to office, President Trump has enacted a 10% tariff on a broad range of imported goods and 25% levies on steel, aluminum, and automobiles. Although he reversed some of the more stringent tariffs on numerous countries, tensions have escalated with China, resulting in a 145% tariff on Chinese imports and a 125% retaliatory tariff from Beijing on U.S. products.
WTO Director-General Ngozi Okonjo-Iweala expressed her concerns, stating, “I’m very concerned,” and highlighted that the organization anticipates a staggering 81% reduction in trade volumes between the United States and China. She further emphasized that the persistent uncertainty could impede global growth, with particularly adverse effects on the world’s most vulnerable economies.
Initially, the WTO projected global trade to expand in 2025 and 2026, with merchandise trade expected to grow in line with global GDP, and trade in services anticipated to increase even more rapidly. However, the latest annual global trade outlook indicates a 0.2% decline in world merchandise trade for 2025, a figure nearly three percentage points lower than previous forecasts without the new tariffs.
The WTO warns of “severe downside risks” that could further shrink trade by 1.5% in 2025 if the situation deteriorates. While services trade is not directly subject to tariffs, it is also expected to experience adverse effects, with global commercial services trade now forecasted to grow by 4.0%, approximately one percentage point less than previously expected.
Regional impacts vary, with North America projected to see a 12.6% decline in exports and a 9.6% drop in imports in 2025. This downturn is expected to subtract 1.7 percentage points from world merchandise trade growth for the year. In contrast, Asia is anticipated to experience modest growth, with both exports and imports increasing by 1.6%. China’s merchandise exports are forecasted to rise between 4% and 9% across all regions except North America, as trade is redirected. European exports are on track to grow by 1%, and imports by 1.9%.
Looking ahead, the WTO projects global GDP growth of 2.2% in 2025 and 2.4% in 2026. However, Okonjo-Iweala cautioned that the ongoing “decoupling” of the U.S. and Chinese economies could lead to a broader fragmentation of the global economy along geopolitical lines into two isolated blocks. Such a scenario could result in a nearly 7% reduction in global GDP by 2040, which she described as “quite significant and substantial.”
In response to these challenges, Okonjo-Iweala called for reform within the WTO, urging countries to “inject dynamism” into the organization. She emphasized the need to streamline decision-making processes and adapt agreements to better meet today’s global realities, stating, “We shouldn’t waste this crisis.”
*
Email *
Website
