In a surprising turn of events, the World Trade Organization (WTO) has revised its forecast for global merchandise trade volumes, projecting a 0.2% contraction for 2025. This marks a significant departure from the earlier expectation of a 2.7% growth, largely attributed to the ongoing tariff conflict initiated by the United States. The implications of this trade war are profound, and the ripple effects are expected to impact various sectors worldwide.
Impact of Tariffs on Global Trade
The WTO’s forecast takes into account a 90-day suspension of reciprocal tariffs by the U.S. If these tariffs were to take effect, the organization estimates an additional 0.6% decline in global merchandise trade growth. The situation could worsen if retaliatory measures continue, potentially bringing the total decline to 1.5%, according to the latest Global Trade Outlook and Statistics Report.
- Projected Trade Growth for 2026: The WTO anticipates a rebound in trade volumes in 2026, with a 2.5% increase expected.
Services Trade Faces Challenges
Though tariffs primarily target goods, the services sector is not immune to the fallout. The WTO forecasts that the global volume of commercial services trade will only grow by 4.0% in 2025 and 4.1% in 2026, which falls short of the baseline expectations of 5.1% and 4.8%, respectively. The high tariffs imposed on goods are likely to create ripple effects that negatively impact the broader economy, including services.
A Look Back at 2024
The decline in trade volumes comes on the heels of a robust performance in 2024. During that year, the world merchandise trade saw an impressive 2.9% growth, while commercial services trade surged by 6.8%. In terms of value, global merchandise exports rose by 2%, reaching $24.43 trillion, and commercial services exports climbed by 9%, totaling $8.69 trillion.
Trade Diversion Concerns
The ongoing disruptions in U.S.-China trade relations are raising alarms about potential trade diversions. This shift may lead to increased competition for third-party markets, with Chinese merchandise exports projected to increase by 4% to 9% across regions outside of North America as trade routes are redirected.
Economic Outlook Amid Trade Wars
The economic consequences of the global tariff conflict are projected to impact worldwide GDP significantly. The WTO economists forecast that global GDP will grow by 2.2% in 2025, which is 0.6 percentage points below the baseline forecast without tariff changes. A slight recovery to 2.4% is expected in 2026. However, if trade policy uncertainty spreads, the GDP loss could nearly double, reaching 1.3 percentage points below the baseline.
Regional Trade Forecasts
Under the current trade policies, North America is anticipated to experience a 12.6% drop in exports and a 9.6% decline in imports in 2025. This downturn is expected to negatively impact global merchandise trade growth by 1.7 percentage points.
- Asia: Modest growth in exports and imports is expected, around 1.6% for both.
- Europe: Slightly better performance with 1.0% export growth and 1.9% import growth projected.
As the world navigates through these turbulent trade waters, stakeholders are urged to stay informed and adapt to the evolving landscape.
