WTO Slashes Global Trade Outlook on Trump Tariff Disruptions
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The World Trade Organization slashed its forecast for merchandise trade this year as soaring U.S. tariffs and broader uncertainty hammer international commerce.
The Geneva-based WTO expects the volume of world merchandise trade to decline by 0.2% in 2025 — almost three percentage points lower than it would have been without the U.S.-led trade war, marking a dramatic reversal from expectations at the start of the year. Trade is forecast to rebound by 2.5% in 2026.
The flow of goods and services around the world, which went through a tumultuous period during the COVID pandemic, had only recently returned to normal patterns before Donald Trump was elected U.S. president in November. He ran on promises to revive the American middle class with tariffs aimed at China and other countries where the U.S. maintained large trade deficits.
Two weeks ago, Trump announced so-called reciprocal import taxes ranging from 10% to 50%, though days later he suspended the highest rates for 90 days and kept 10% as the floor for all countries except China, whose exports to the U.S. now face duties in excess of 100%. The reprieve was aimed at giving bilateral negotiations time to play out, and a delegation from Japan is visiting the White House for talks April 16.
BREAKING: Under current tariffs, goods trade is forecast to fall 0.2% in 2025, 2.9 pp less than baseline. Downside risk of reciprocal tariffs & broader uncertainty could lead to sharper decline of 1.5%. Services trade also affected. : — WTO (@wto)
In the WTO’s forecasts, this year’s contraction will be even worse if the U.S. pushes ahead with those higher levels of reciprocal tariffs. “Together, reciprocal tariffs and spreading trade policy uncertainty would lead to a 1.5% decline in world merchandise trade in 2025,” the WTO said in its report April 16.
While protectionist policies may boost domestic production, raise revenue and narrow trade imbalances — all three of which are Trump’s stated goals — the WTO said that “over the medium to long term, higher import tariffs generally have an overall net negative effect on economic activity and trade.”
In response to Trump’s measures, China has retaliated with levies of its own, as well as other measures targeting U.S. companies and restricting access to exports of critical raw materials.
The WTO cautioned that a cycle of tit-for-tat responses could lead to a higher cost of living.
“Retaliatory measures in response to restrictive trade policies — such as tariffs on specific, difficult-to-substitute materials or intermediate goods — could have an outsized impact on inflation, or at least inflation expectations,” the trade body said in its report.
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North American trade will be hardest hit while Asia and Europe will continue to see modest growth.
But the WTO warned that massive disruption in U.S. and China trade may see Chinese exporters looking for new markets.
“The disruption in U.S.-China trade is expected to trigger significant trade diversion, raising concerns among third markets about increased competition from China,” the WTO wrote.
Services trade will also be hurt. The WTO now sees commercial services growing by 4% this year and 4.1% in 2026, compared with 6.8% last year.
