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World Trade Organization: US tariffs will cause global trade to shrink

2025-04-16 20:29:28 / EKONOMI&SOCIALE ALFA PRESS

World Trade Organization: US tariffs will cause global trade to shrink

The World Trade Organization (WTO) has predicted that global trade will fall this year due to US President Donald Trump's tariffs. The WTO added that "serious downside risks", including reciprocal tariffs and political uncertainty, could lead to an even bigger decline in global merchandise trade.

"The decline is expected to be particularly large in North America," the WTO said, predicting trade to fall by more than a tenth in that region.

Ngozi Okonjo-Iweala, the director-general of the WTO, called the US-China decoupling a phenomenon that is truly worrying. The WTO had previously expected global merchandise trade to expand by 2.7% in 2025, but now predicts it will contract by 0.2%. Chief economist Ralph Ossa said: “Tariffs are a policy lever with far-reaching and often unintended consequences. Our simulations show that trade policy uncertainty has a significant dampening effect on trade flows, reducing exports and weakening economic activity . ”

Also on Wednesday, the UN trade and development body, UNCTAD, released its own report predicting global growth would slow to 2.3% in 2025 due to escalating trade tensions and uncertainty. It said the projection was below the 2.5% threshold widely seen as signaling a global recession.

Some regions may still see trade growth

A 10% base tariff on nearly all foreign imports into the US began on April 5, although some countries and goods are exempt. China has a much higher tariff, which now reaches 145% on most goods. The US stock market slid at the open on Wednesday with major indexes falling amid continued uncertainty.

Despite the forecast decline in trade with the US, the WTO expects some regions to still see trade growth. It said Asia and Europe are still expected to see modest growth in both exports and imports this year.

"The collective contribution to world trade growth of other regions will also remain positive," the WTO report said.

For the first time, the report includes a forecast for services trade, which is when countries buy and sell services to each other instead of goods.

This is common in industries such as tourism or finance, where nothing physical is shipped but a service is provided. The WTO predicts that trade in services will grow by 4% in 2025, which is about a percentage point less than expected, writes the BBC .

Trump's tariff announcements and reductions

Since Trump's inauguration in January, there has been a flurry of tariff announcements. The US president says import taxes will encourage American consumers to buy more American-made goods, increase the amount of taxes levied and lead to greater levels of investment in the country.

However, critics say that returning manufacturing to the U.S. is complicated and could take decades, and that the economy will struggle in the meantime. Trump has also walked back many of his own announcements. Just hours after the steep tariffs against about 60 of America’s trading partners began earlier this month, Trump announced a 90-day pause on those tariffs for all countries outside China, in the face of growing opposition from politicians and markets.

 

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