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

The World Trade Organisation (WTO) on Wednesday said that the world merchandise trade is expected to decline by 0.2 per cent in volume terms in 2025 amid imposition of high tariffs by the US and China on each other. It said that the application of reciprocal tariffs and broader spillover of policy uncertainty could lead to an even sharper decline of 1.5 per cent in global goods trade and hurt export-oriented least-developed countries. "The volume of world merchandise trade is expected to decline by 0.2 per cent 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 US suspension of reciprocal tariffs for 90 days is easing the contraction in trade, but downside risks remain. The decline in trade is expected to be particularly steep in North America, where exports are forecast to fall by 12.6%. Risks to the global goods trade outlook persist due to the reintroduction of reciprocal tariffs announced by the US, which were subsequently suspended for 90 days, and the possibility of increased trade policy uncertainties affecting non-US trade relations. If enacted, the US reciprocal tariffs are estimated to reduce global goods trade growth by an additional 0.6% this year, while this contraction could reach 0.8% if trade policy uncertainty rises.
The combination of the introduction of reciprocal tariffs and the spread of uncertainty could lead to a total 1.5% decline in global goods trade this year. WTO expects North America's exports to fall by 12.6% and imports by 9.6% this year, while Asia's and Europe's exports and imports are forecast to grow by 1% and 1.9%, respectively."The disruption in US-China trade is expected to trigger significant trade diversion, raising concerns among third markets about increased competition from China," it said.
Chinese goods exports are projected to rise by 4% to 9% across all regions outside North America as trade is redirected. Meanwhile, US imports from China are expected to fall sharply in sectors such as textiles, apparel, and electrical equipment, creating new export opportunities for other suppliers able to fill the gap. "This could open the door for some least-developed countries (LDCs) to increase their exports to the US market," it noted.