The World Trade Organization (WTO) has sharply revised its global trade forecast downward due to escalating tariffs and rising uncertainty.
Previously expecting growth, the WTO now predicts a 0.2% decline in merchandise trade for 2025.
This downgrade reflects nearly three percentage points below earlier estimates, primarily driven by US-led trade tensions.
Earlier this year, global trade showed signs of recovery following pandemic disruptions.
However, newly elected US President Donald Trump introduced aggressive trade policies targeting imbalances with China.
Consequently, reciprocal tariffs between 10% and 50% have been imposed, with some temporarily paused.
Notably, China faces duties exceeding 100%, further straining relations.
The WTO warns that sustained high tariffs could deepen the trade contraction, potentially reaching 1.5% in 2025.
Although protectionist measures may temporarily boost domestic production and reduce deficits, they ultimately harm economic growth.
Over time, higher import taxes typically weaken overall trade activity, undermining long-term stability.
In response to US tariffs, China has imposed retaliatory levies and export restrictions on American firms and critical materials.
The WTO cautions that such measures risk fueling inflation, especially for essential goods with limited substitutes.
Rising costs could disrupt supply chains and destabilize consumer prices worldwide.
North America is projected to experience the most significant impact. In contrast, Asia and Europe may witness moderate growth.
Furthermore, escalating US-China trade tensions are likely to drive Chinese exporters towards exploring new markets, increasing competition.
This strategic shift could fundamentally reshape global trade dynamics, compelling other economies to adapt to new challenges.
Moreover, the growth of services trade is expected to decelerate, with commercial services expanding by only 4% in 2025.
In addition, projections indicate a slight increase to 4.1% in 2026, highlighting ongoing challenges in this sector.
This marks a significant drop from last year’s 6.8% surge, signaling broader economic caution.
Given these challenges, the WTO urges policymakers to reconsider protectionist strategies.
Constructive dialogue and cooperation are essential to minimizing harm to the global economy.
Without intervention, escalating trade barriers could trigger prolonged instability, affecting businesses and consumers worldwide.
Stakeholders must prioritize balanced solutions to foster sustainable growth.
