WTO sounds alarm: Trump tariffs threaten to shrink global trade by up to 1.5%

WTO warns global trade could dip up to 1.5%

Global merchandise trade is projected to decline between 0.2 per cent and 1.5 per cent in 2025, depending on the trajectory of U.S. President Donald Trump’s tariff policies, the World Trade Organization (WTO) said on Wednesday.

In their latest Global Trade Outlook and Statistics” report WTO cited “The outlook for global trade has deteriorated sharply due to a surge in tariffs and trade policy uncertainty.”

The WTO’s latest forecast highlights mounting concerns over rising trade tensions and policy unpredictability, warning that ongoing uncertainty could trigger “severe negative consequences for the world economy.”

BREAKING: Under current tariffs, goods trade is forecast to fall 0.2% in 2025, 2.9 pp less than baseline. Downside risk of reciprocal tariffs & broader uncertainty could lead to sharper decline of 1.5%. Services trade also affected. #GlobalTradeOutlook: https://t.co/gw6CWYFYM8 pic.twitter.com/ofqKpQOp2P
WTO (@wto) April 16, 2025

While current estimates suggest a modest 0.2% dip in global goods trade, the organization cautioned that intensified tariffs and protectionist measures could cause the downturn to worsen, with a potential 1.5% decline on the horizon.

The decline is anticipated to be particularly steep in North America, where exports are forecasted to drop by 12.6% this year.

The World Trade Organization (WTO) on Wednesday said global trade prospects have taken a significant hit amid rising tariffs and growing uncertainty driven by U.S. President Donald Trump’s trade policies.

“Risks to the forecast include the implementation of the currently suspended reciprocal tariffs by the United States, as well as a broader spillover of trade policy uncertainty beyond U.S.-linked trade relationships,” the WTO said.

“If enacted, reciprocal tariffs would reduce world merchandise trade growth by an additional 0.6 percentage points, posing particular risks for least-developed countries (LDCs), while a spreading of trade policy uncertainty (TPU) would shave off a further 0.8 percentage points. Taken together, the reciprocal tariffs and spreading TPU would lead to a 1.5% decline in world merchandise trade volume in 2025.”

The impact of recent trade policy shifts, especially those tied to U.S. tariffs, will likely play out very differently across regions WTO report cited.

The WTO noted that “North America now subtracts 1.7 percentage points from global merchandise trade growth in 2025,” effectively pushing overall trade growth into the negative. Meanwhile, “Asia and Europe continue to contribute positively, but less than in the baseline scenario,” with Asia’s contribution halved to just 0.6 percentage points.

The report also emphasized that tensions in US China trade are “expected to trigger significant trade diversion,” prompting fears in third-party markets over rising competition from Chinese exports.

According to the WTO, “Chinese merchandise exports are projected to rise by 4% to 9% across all regions outside North America as trade is redirected.”

At the same time, “U.S. imports from China are expected to fall sharply in sectors such as textiles, apparel and electrical equipment,” potentially opening up new opportunities for other suppliers—including least-developed countries—to fill the gap in the U.S. market.