Geneva: The World Trade Organization (WTO) forecasts a 0.2% decline in global merchandise trade volume for 2025, nearly three percentage points below a low-tariff baseline scenario, based on the tariff situation as of April 14, according to its Global Trade Outlook and Statistics report released today. If trade tensions escalate, the decline could reach 1.5%. Commercial services trade, though not directly subject to tariffs, is expected to grow by 4.0%, a slower pace than anticipated, due to economic uncertainty.
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. However, the enduring uncertainty threatens to act as a brake on global growth, with severe negative consequences for the world, the most vulnerable economies in particular. In the face of this crisis, WTO members have the unprecedented opportunity to inject dynamism into the organization, foster a level-playing field, streamline decision-making, and adapt our agreements to better meet today’s global realities.”
The report identifies risks from reactivated US reciprocal tariffs, which could reduce merchandise trade growth by 0.6 percentage points, and spreading trade policy uncertainty, which could shave off another 0.8 percentage points, potentially causing a 1.5% decline in 2025. These scenarios are explored in the Analytical Chapter. WTO Chief Economist Ralph Ossa stated: “Our simulations show that trade policy uncertainty has a significant dampening effect on trade flows, reducing exports and weakening economic activity. Moreover, tariffs are a policy lever with wide-ranging and often unintended consequences. In a world of growing trade tensions, a clear-eyed view of those trade-offs is more important than ever.”
At the start of 2025, the WTO Secretariat expected continued expansion of world trade, with merchandise trade growing in line with world GDP and commercial services trade increasing at a faster pace. However, a large number of new tariffs introduced since January prompted WTO economists to reassess the trade situation, resulting in a substantial downgrade to the merchandise trade forecast and a smaller reduction for services trade. In 2024, merchandise trade volume grew 2.9%, outpacing global GDP growth of 2.8%, marking the first year since 2017 (excluding the COVID-19 rebound) where trade grew faster than output.
Regional impacts differ sharply. North America is projected to face a 12.6% decline in exports and a 9.6% drop in imports, subtracting 1.7 percentage points from global merchandise trade growth, turning the overall figure negative. Asia expects 1.6% growth in both exports and imports, while Europe anticipates 1.0% export growth and 1.9% import growth. Both regions contribute positively to global trade growth, though less than in the low-tariff scenario. Other regions, particularly energy producers, maintain positive contributions due to stable demand for energy products over the global business cycle.
The US-China trade disruption is expected to trigger significant trade diversion. Chinese merchandise exports are projected to rise by 4% to 9% across regions outside North America as trade redirects. US imports from China are expected to fall sharply in sectors such as textiles, apparel, and electrical equipment, creating export opportunities for other suppliers able to fill the gap. Least-developed countries (LDCs), with export structures similar to China’s in textiles and electronics, may benefit from this diversion under the current pause on US reciprocal tariffs. However, reinstatement of these tariffs could have severe repercussions for LDCs, whose economies are sensitive due to their concentration of trade on a small number of products as well as their limited resources to deal with setbacks.
In 2024, services trade accounted for 26.4% of global trade, the highest share since 2005, totalling US$ 8.69 trillion with 9% growth, mirroring 2023’s performance and contrasting with a 2% value increase in goods trade. Rising demand for services and advances in digitalisation have helped expand the contribution of services to global trade. However, high tariffs on goods are expected to ripple through the economy, affecting services trade. Reduced goods trade volumes will weaken demand for freight shipping and logistics services, which account for the bulk of transport. International travel, particularly leisure travel, may be curtailed as economic uncertainty reduces discretionary spending on trips and accommodations. Intermediate services, including professional, research and development, and information technology services, are likely to face declining demand in the current economic climate.
Regional services trade forecasts show Europe leading with 5.0% export growth in 2025, continuing at 4.4% in 2026. Asia’s services exports are projected to grow by 4.4% in 2025 and 5.1% in 2026. North America’s growth slows to 1.6% in 2025 but rises to 2.3% in 2026. The Middle East expects 1.7% growth in 2025 and 1.0% in 2026, while the Commonwealth of Independent States (CIS) anticipates 1.1% in 2025 and 3.5% in 2026. Africa and South and Central America, including the Caribbean, are forecast to record declines in services exports in 2025.
– global bihari bureau
