WTO forecasts slump in Global trade this year due to tariff war

The World Trade Organization (WTO) has released its Trade Forecast for 2025 and 2026. The report has predicted that global trade will fall this year as a result of tariffs by United States President Donald Trump. WTO Director General Ngozi Okonjo-Iweala said in a statement that China-US decoupling is really worrying. She said that WTO currently estimate that merchandise trade between the two economies will fall by 81 per cent and it would have reached 91 per cent without recent exemptions for products such as smartphones. She further said that a drop in US-China trade of these magnitudes is tantamount to a decoupling of the two economies.

Moreover, WTO’s Trade Forecast has claimed that under current



conditions, the volume of world merchandise trade is likely to fall by 0.2 per cent in 2025. The decline is expected to be particularly steep in North America, where exports are forecasted to drop by 12.6 per cent. However, severe downside risks exist, including the application of reciprocal tariffs and broader spillover of policy uncertainty, which could lead to an even sharper decline of 1.5 per cent in global goods trade and hurt export-oriented least-developed countries. 

The report contains for the first time a forecast for services trade, which is expected to grow by 4 per cent in 2025, around 1 percentage point less than expected.