WTO projects decline in world trade volume in 2025 amid US tariff war

The WTO warned that trade could shrink even further, to -1.5% in 2025, if the situation deteriorates.

The World Trade Organisation (WTO) on Wednesday said that world merchandise trade is expected to decline by 0.2% in volume terms in 2025 amid the imposition of high tariffs by the US and China on each other.

It said that the application of reciprocal tariffs and the broader spillover of policy uncertainty could lead to an even sharper decline of 1.5% in global goods trade, which would hurt export-oriented least-developed countries.

"The volume of world merchandise trade is expected to decline by 0.2% in 2025 under current conditions, nearly three percentage points lower than what would have been expected under a low tariff baseline scenario," according to the WTO Secretariat’s latest Global Trade Outlook and Statistics report.

The forecast does not augur well for India, which is aiming to increase its goods and services exports to USD 2 trillion by 2030. India’s exports turned positive after four months, recording a marginal 0.7% increase to USD 41.97 billion in March, while overall exports of goods and services have crossed an all-time high of USD 820 billion in the last fiscal despite global economic uncertainties.

The WTO warned that trade could shrink even further, to -1.5% in 2025, if the situation deteriorates. Services trade, though not directly subject to tariffs, is also expected to be adversely affected, with the global volume of commercial services trade now forecast to grow by 4%, slower than expected.

WTO Director-General Ngozi Okonjo-Iweala said: "I am deeply concerned by the uncertainty surrounding trade policy, including the US-China stand-off. The recent de-escalation of tariff tensions has temporarily relieved some of the pressure on global trade."

In October 2024, the WTO had forecast a 3% growth for 2025. It added that risks to the merchandise trade forecast persist, particularly from the reactivation of the suspended "reciprocal tariffs" by the United States, as well as the spread of trade policy uncertainty that could impact non-US trade relationships.

"If realized, reciprocal tariffs would reduce global merchandise trade volume growth by 0.6 percentage points in 2025, while spreading trade policy uncertainty could shave off another 0.8 percentage points," it said. Together, reciprocal tariffs and spreading trade policy uncertainty would lead to a 1.5% decline in world merchandise trade in 2025, the WTO said.