WTO warns that global trade prospects will deteriorate dramatically, and tariff shocks may trigger trade contraction in 2025

The Zhitong Finance App learned that the latest “Global Trade Outlook and Statistics” report released by the World Trade Organization (WTO) on Wednesday indicates that global trade prospects have “deteriorated dramatically” under the influence of the new round of tariff policies promoted by US President Trump. “Prospects for global trade have declined sharply due to surging tariffs and increasing trade policy uncertainty,” the report said.

According to current tariff measures, and considering the 90-day suspension of “equal tariffs” currently imposed by the US, the WTO expects global merchandise trade to shrink by 0.2% in 2025, and there may be a moderate recovery in 2026, with an increase of about 2.5%. Among them, the trade situation in North America is expected to be the most severe, and exports may plummet by 12.6% in 2025.

The WTO also warned that global trade faces “serious downside risks”. If the US officially implements the currently suspended equal tariff policy and trade policy uncertainties spill over further, global merchandise trade volume may drop by as much as 1.5% in 2025. This will be a particularly heavy blow to export-oriented and least developed countries.

Notably, global trade showed strong performance in 2024, with global merchandise trade growing by 2.9% and trade in commercial services growing by 6.8%.

The WTO said that compared to previous expectations based on a “low tariff” benchmark scenario, the current 0.2% decline means that the global trade outlook has been lowered by nearly 3 percentage points, which also marks a major reversal in the optimistic expectations at the beginning of the year. “The risks facing current forecasts include the possibility that the US may resume equal tariffs and the possibility that trade policy uncertainty will extend from the US to the world.”

The agency said that if equal tariffs are fully implemented, it will further drag down the growth of global commodity trade by 0.6 percentage points; if trade policy uncertainty spreads across the board, it will drag down another 0.8 percentage points. The combination of the two factors may cause total global trade to fall by 1.5% in 2025.

At the beginning of April, Trump announced the imposition of equal tariffs on imported goods from more than 180 countries around the world, which shocked all parties. Among them, the total tax levied by the US on Chinese goods reached 145%. China immediately hit back with retaliatory tariffs of up to 125%.

The new tariff policy triggered severe shocks in the global market, forcing the Trump administration to make temporary concessions. Last week it was announced that it would temporarily reduce the new tariffs on most trading partners to 10% for a period of 90 days to free up time for trade negotiations.

The WTO pointed out in its report that the impact of recent trade policy changes on various regions is clearly different.

According to the updated forecast, North America will reduce global merchandise trade growth by 1.7 percentage points in 2025, turning the overall growth rate negative. In contrast, Asia and Europe will still provide positive contributions, but not as strong as the benchmark scenario, and Asia's contribution will be halved to 0.6 percentage points.

The agency specifically pointed out that the interruption of trade between China and the US will trigger a “significant trade shift”, causing tertiary markets to worry about China's increased competitiveness. China's merchandise exports to regions other than North America are expected to increase by 4% to 9%, as Chinese exports will be redirected to other regions. At the same time, there will be a sharp decline in products such as textiles, clothing, and electrical equipment imported by the US from China, which will provide new opportunities for other exporters.

According to the WTO, this trend may open the door for some least developed countries to enter the US market and help them occupy a larger share of the global supply chain.