Rising tariffs seen hampering trade growth — WTO

‘This marks a notable reversal from earlier forecasts when WTO economists anticipated continued trade expansion, supported by improving macroeconomic conditions’

Teddy Montelibano·2 May 2025, 12:20 am·1 MIN READ

Rising tariffs seen hampering trade growth — WTO

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Notable reversal

“This marks a notable reversal from forecasts earlier this year, when WTO economists anticipated continued trade expansion, supported by improving macroeconomic conditions,” said the report.

The impact of recent trade policy changes varies sharply across regions. North America is foreseen to subtract 1.7 percentage points from global merchandise trade growth in 2025, turning the overall figure negative.

Asia and Europe will continue to contribute positively but less than in the baseline “low tariff” scenario, with Asia’s contribution halved to 0.6 percentage points.

Meanwhile, the combined contribution of other regions will also decline somewhat but will remain positive.

U.S.- China decoupling

An important driving force behind these changes is the U.S.- China decoupling resulting from tariffs that now well exceed 100 percent, said the WTO report.

The disruption in US — Chinese trade is also expected to trigger significant trade diversion, raising concerns among other markets about increased competition from China.

As trade is redirected, Chinese merchandise exports are projected to rise by between 4% and 9% across all regions outside North America.

At the same time, US imports from China are expected to fall sharply in such sectors as textiles, apparel, and electrical equipment, creating new export opportunities for other suppliers able to fill the gap in the US market.

Services trade, while not directly subject to tariffs, is also expected to be adversely affected, said WTO.

“Declines in goods trade are likely to reduce demand for related services, such as transport and logistics, while broader uncertainty is likely to dampen discretionary spending on travel and to slow investment-related services,” the document said.

Global services trade volume

As a result, the volume of global services trade is now forecast to grow by 4.0 percent in 2025 and 4.1 percent in 2026, well below the baseline projections of 5.1 percent and 4.8 percent.

Moreover, world gross domestic product (GDP) is now expected to grow by 2.2 percent in 2025 — 0.6 percentage points below the baseline prediction — before recovering slightly to reach 2.4 percent in 2026.

The largest impact will again be felt in North America, where growth is projected to slow by 1.6 percentage points, followed by Asia (-0.4 points) and South and Central America and the Caribbean (-0.2 percentage points).

While reciprocal tariffs alone would have a limited effect on global GDP, a wider spread of trade policy uncertainty could nearly double the projected GDP loss, bringing it to 1.3 percentage points below the baseline scenario.

All of these follow what had been a notably strong year for trade, according to the WTO which pointed out that in 2024, the volume of world merchandise trade grew by 2.9 percent, and commercial services trade expanded by 6.8 percent.