WTO revises global trade forecast to a decline amid US tariff impact

On Wednesday, the World Trade Organization (WTO) announced a significant revision of its global merchandise trade forecast, projecting a downturn of 0.2% for the current year. This marks a stark contrast to the 3.0% growth anticipated in October. The revised forecast is based on the current trade measures as of the start of this week.

The WTO attributed the downward revision to the potential reintroduction of U.S. tariffs by President Donald Trump on steel and car imports, along with broader global tariffs that had been temporarily halted. These tariffs, if fully reinstated, could diminish trade growth by 0.6 percentage points. Additionally, spillover effects are expected to further reduce trade growth by 0.8 points, potentially resulting in a combined 1.5% decline in global merchandise trade—the most severe since the COVID pandemic peak in 2020.

In the context of heightened trade tensions, the WTO cautioned that the "unprecedented nature of the recent trade policy shifts" necessitates a more careful interpretation of predictions. Despite the current outlook, the WTO forecasts a modest rebound in trade growth to 2.5% by 2026.

The WTO further noted that disruptions in U.S.-China trade relations are likely to boost Chinese merchandise exports to regions outside North America by 4% to 9%. This shift presents opportunities for other countries to fill market gaps in the U.S., particularly in sectors such as textiles, clothing, and electrical equipment.

The impact of the trade upheaval is not limited to goods; the WTO also projected that services trade would suffer due to weakened demand in related areas like transport and logistics. Broader uncertainties could also suppress spending on travel and investment-related services. As a result, the WTO anticipates growth in commercial services trade to be lower than previous projections, at 4.0% in 2025 and 4.1% in 2026, compared to baseline figures of 5.1% and 4.8%.

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This expected downturn follows a robust 2024, during which world merchandise trade expanded by 2.9% and commercial services trade saw an increase of 6.8%.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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