Due to President Donald Trump’s tariffs, the World Trade Organization (WTO) has predicted that global trade will decrease this year. It added “severe downside risks”, including reciprocal tariffs and political uncertainty, could lead to an even sharper decline in global goods trade.
The World Trade Organization (WTO) stated, “The decline is expected to be particularly steep in North America,” predicting a drop in trade of more than a tenth in that region. Ngozi Okonjo-Iweala, the WTO director general, called the “decoupling” of the US and China “a phenomenon that is really worrying to me”
The WTO previously expected global goods trade to expand by 2.7% in 2025 but it now forecasts it will fall by 0.2%.
“Tariffs are a policy lever with wide-ranging, and frequently unintended consequences,” stated chief economist Ralph Ossa. “Our simulations show that trade policy uncertainty has a significant dampening effect on trade flows, reducing exports and weakening economic activity,” he added.
In addition, the UN body responsible for trade and development, UNCTAD, released its own report on Wednesday. In it, the body projects that global growth will slow to 2.3% in 2025 as a result of growing trade tensions and uncertainty. It said the projection was below “the 2.5% threshold widely viewed as signalling a global recession”.
Trade could still expand in some areas. On April 5, almost all foreign imports into the United States were subject to a baseline tariff of 10%, with some exceptions. China has a much higher tariff, which now totals 145% on most goods.
The US stock market slid on opening on Wednesday with the big indexes falling amid the ongoing uncertainty.
Despite the prediction of plunging trade with the US, the WTO expects some regions will still see trade growth.
It said Asia and Europe were still projected to post modest growth in both exports and imports this year.
“The collective contribution to world trade growth of other regions would also remain positive,” the WTO report said.
A forecast for services trade, in which nations trade services rather than goods, is included for the first time in the report. This is common in industries such as tourism or finance where nothing physical is shipped but a service is provided.
Services trade is expected to expand by 4% in 2025, which is less than expected, according to the WTO. Trump’s tariff announcements and climbdowns
Since Trump’s inauguration in January there has been a flurry of announcements on tariffs.
The president of the United States claims that the import taxes will raise more money, encourage more Americans to buy American-made goods, raise taxes, and bring in a lot of money to the country. However, critics say bringing manufacturing back to the US is complicated and could take decades and that the economy will struggle in the meantime.
Trump has also backtracked on many of his announcements.
Just hours after steep levies against roughly 60 of America’s trading partners kicked in earlier this month, Trump announced a 90-day pause on those tariffs to all countries bar China, in the face of mounting opposition from politicians and the markets.
In March, the governor of the Bank of England has warned that Trump’s tariffs could mean less money in UK consumers’ pockets.