The World Trade Organization (WTO) has issued a warning that the tariff policies proposed by former US President Donald Trump are expected to cause a contraction in global trade throughout 2025. The WTO's forecast highlights that the volume of international trade in goods is likely to decline by 0.2% this year as a direct consequence of ongoing tariff adjustments and trade tensions, particularly between the United States and China.
Significant reductions in trade are anticipated in North America, even if the most severe tariffs are not fully implemented. Exports from the region are projected to fall by 12.6%, while imports are expected to decrease by 9.6%. The WTO cautioned that should the US proceed with its most stringent “reciprocal” tariffs against countries that retaliate with equivalent import duties, the global trade slump could deepen substantially to a 1.5% drop. The organisation attributes this potential decline primarily to the negative impact that persistent uncertainty surrounding trade policy has on business confidence and economic activity.
Earlier in the month, Trump placed a temporary 90-day suspension on his toughest tariff measures in order to provide more than 70 countries an opportunity to address the United States’ trade concerns. Nevertheless, in parallel, the US has been raising duties on Chinese imports, with some tariffs increasing to as high as 145%, and remains engaged in complex negotiations with Canada and Mexico regarding import taxes on their goods.
WTO Director-General Ngozi Okonjo-Iweala expressed concern over the ongoing instability, stating: “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.” This sentiment was echoed by WTO chief economist Ralph Ossa, who noted in a statement that “trade policy uncertainty has a significant dampening effect on trade flows, reducing exports and weakening economic activity.”
Ossa further highlighted the broad consequences of tariff policies, saying: “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.” The WTO's analysis underscores the complexity and risks associated with escalating trade disputes and their potential to hinder global economic progress.
Source: Noah Wire Services