Geneva-based World Trade Organization revised sharply its global merchandise trade volume growth forecast for 2025 on Wednesday – from a continued expansion it had expected when the year dawned – to a decline by 0.2%, amid fears over the U.S. tariff developments.
The volume of world merchandise trade is expected to decline by 0.2% under current conditions, which would be nearly three percentage points lower than what would have been expected under a low tariff baseline scenario, it said.
Trade could shrink even further, to 1.5% in 2025, if the situation deteriorates, it said in the Global Trade Outlook and Statistics report. This will be in sharp contrast to 2024 when the volume of world merchandise trade grew by 2.9%.
Risks to the merchandise trade forecast persist, WTO said. If the U.S. goes ahead with the reciprocal tariffs President Donald Trump announced recently before pausing their roll out for 90-days, it expects the move would reduce global merchandise trade volume growth by 0.6 percentage points this year.
Additionally, the spreading trade policy uncertainty could shave off another 0.8 percentage points. Together, reciprocal tariffs and spreading trade policy uncertainty would lead to a 1.5% decline in world merchandise trade in 2025, WTO said.
“I am deeply concerned by the uncertainty surrounding trade policy, including the U.S.-China stand-off. The recent de-escalation of tariff tensions has temporarily relieved some of the pressure on global trade,” Director-General Ngozi Okonjo-Iweala said in a release on the latest report.
The enduring uncertainty, however, threatens to act as a brake on global growth with severe negative consequences for the world, in particular for the most vulnerable economies. The situation also presents an unprecedented opportunity for WTO members to foster a level-playing field, streamline decision-making, she said.
Though not directly subject to tariffs services trade is also expected to be affected with the global volume of commercial services trade now forecast to grow by 4.0%, slower than expected, WTO said. At the start of 2025, WTO said it expected to see continued expansion of world trade in 2025 and 2026, with merchandise trade growing in line with world GDP and commercial services trade increasing at a faster pace.
The disruption in US-China trade is expected to trigger significant trade diversion, raising concerns among third markets about increased competition from China, WTO said.
Earlier on Wednesday, the United Nations Conference on Trade and Development said it expected global growth to slow to 2.3% in 2025. This will mark a shift towards a recessionary path. Subdued demand, trade policy shocks, financial turbulence and systemic uncertainty are bound to intensify pressures, particularly for developing countries.
It said citing how the uptick in global trade in late-2024 and early-2025 was driven in part by front-loaded orders. This momentum is expected to fade or even reverse during the rest of 2025 as new tariffs come into effect. Trade policy uncertainty is already affecting businesses and long-term planning decisions.
With trade tensions rising and growth slowing, UNCTAD cautions against the dangers of economic fragmentation and geo-economic confrontation. Instead, strengthening regional and international policy coordination, and building on existing trade and economic links, will be key to resilience in a fragile global economy, it said.
Published – April 16, 2025 10:29 pm IST
