WTO SLASHES TRADE FORECAST — SAYS TRUMP TARIFFS COULD TRIGGER GLOBAL SLUMP

[HaiderAfan]

With the revival of U.S. tariffs under President Trump potentially leading to the worst global trade collapse since the COVID-19 pandemic, the World Trade Organization (WTO) has drastically reduced its 2025 global trade growth prediction from a modest +3.0% to a contraction of -0.2%, this sharp downgrading highlights the significant disruption to global trade caused by recent trade policies, especially the United States imposition of up to 245% tariffs on Chinese imports, global merchandise commerce might drop by about 1.5% if the United States completely restores its tariffs and trade restrictions, according to the WTO, with major declines also expected in services like shipping and investment, the group characterizes the current state of affairs as "unprecedented," stressing that the prospects of a more severe recession are growing and that the prognosis is the worst since the pandemic began.

In contrast to previous projections of consistent expansion, the World Trade Organization most recent study indicates that the total volume of global commercial trade is anticipated to decrease by 0.2% in 2025. This drop is mostly due to rising trade tensions, particularly between the United States and China, where China has responded with reciprocal tariffs of up to 125% after the US placed 145% on Chinese imports, the research issues a warning that the current state of trade is precarious and might worsen further if trade policy uncertainty continues or reciprocal tariffs are reinstated, the WTO predicts a 2.5% recovery in 2026, but the picture is still dire in the short term.

The effects of these trade disruptions are anticipated to be felt globally, with North America bearing the brunt of the decline—in 2025, exports may drop by 12.6% and imports by 9.6%, on the other hand, it is anticipated that regions such as Asia and Europe would have modest development, with Europe exports growing by 1.0% and Asian imports and exports increasing by about 1.6%, due to shifting global supply networks, Chinese merchandise exports are predicted to increase by 4-9%, the outlook is still bleak overall, though, as global economic growth is predicted to drop to 2.2% in 2025—the lowest level since the pandemic—before bouncing back somewhat to 2.4% in 2026.

Ralph Ossa, the Chief Economist of the World Trade Organization, highlighted that uncertainty in trade policy is a significant factor impeding international trade flows and that economic activity is further weakened by postponed investments and decreased hiring, the most vulnerable economies, especially low-income and emerging nations, are at increased risk due to worsening external financial conditions, unmanageable debt levels and restricted access to finance, the report further emphasizes, many of these countries are already struggling financially, and the continued trade disputes might make matters worse and perhaps cause them to enter a recession.

These worries are supported by a recent UNCTAD estimate that suggests the world economy may slow to 2.3% in 2025, indicating a potential recession, the research emphasizes that the main causes of this slowdown are growing trade tensions, financial instability, and systemic uncertainty, it cautions that growing trade policy fragmentation and tariffs may further slow global development, particularly if the United States increases or reinstates tariffs, which could result in a 1.5% drop in global trade volume, to reduce these risks and increase resilience to growing economic shocks, the research urges more regional trade integration and international policy coordination.