WTO Forecasts Global Merchandise Trade Decline in 2025 Amid Tariffs and Slump Warnings

WTO Revises Global Trade Forecast Downward

• 📉 The World Trade Organization (WTO) has significantly lowered its forecast for global merchandise trade, projecting a decline from previous growth expectations.
• ⚠️ This revision warns of a potential slump, the most severe since the peak of the COVID-19 pandemic, driven by escalating trade policy shifts.

Impact of US Tariffs and Trade Policies

• 📈 WTO's director general stated that global merchandise trade volumes are expected to decline by 0.2% in 2025, a nearly 3 percentage point drop from prior projections.
• ⚖️ This forecast is based on trade measures in place at the beginning of the week, including US tariffs on steel, car imports, and broader global tariffs.
• 🇨🇳 The trade war between the US and China has intensified, with retaliatory tariffs exceeding 100% on each other's imports.

US-China Trade Dynamics and Decoupling

• 📉 Merchandise trade between the US and China is estimated to fall by 81% in 2025, a figure that would reach 91% without exemptions for products like smartphones.
• 🧩 This substantial drop is described as virtually tantamount to a decoupling of the two economies.

Spillover Effects and Opportunities

• 🌍 Trade disruptions could lead to a 4% to 9% increase in Chinese merchandise exports to regions outside North America.
• 👚 Other countries may find opportunities to fill gaps in the US market, particularly in sectors like textiles and clothing.

Services Trade Outlook

• ✈️ While not directly subject to tariffs, the services trade is also expected to be impacted by weakening demand related to goods trade, affecting sectors like transport and logistics.
• 🌐 Broader economic uncertainty may also dampen spending on travel and investment-related services, with commercial services trade growth projected to be below baseline levels for 2025 and 2026.