CMEDIA: Amid reportedly the U.S. President Donald Trump’s tariffs regime the outlook for global trade has “deteriorated sharply”, The World Trade Organization (WTO) warned on Wednesday.
“The outlook for global trade has deteriorated sharply due to a surge in tariffs and trade policy uncertainty,” the WTO said in its latest “Global Trade Outlook and Statistics” report out Wednesday.
Anticipating North America particularly to see a steep decline with exports forecasted to drop by 12.6% this year.
The WTO also warned that “severe downside risks exist,” including the application of “reciprocal” tariffs and a broader spillover of policy uncertainty, “which could lead to an even sharper decline of 1.5% in global goods trade,” particularly hurting export-oriented, least-developed countries.
FollowIng a strong year of World trade in 2024 witnessing trade growth of 2.9% and expansion of commercial services trade by 6.8%, the WTO said that the recent tariff disturbances led to deterioration of global trade outlook.
Marking a significant reversal from the start of the year when the economists expected to see continued trade expansion supported by improving macroeconomic conditions, WTO added that the new estimate of a 0.2% decline in world trade for 2025 is nearly three percentage points lower than it would have been under a “low tariff” baseline scenario.
“Risks to the forecast include the implementation of the currently suspended reciprocal tariffs by the United States, as well as a broader spillover of trade policy uncertainty beyond U.S.-linked trade relationships,” the WTO said.
“If enacted, reciprocal tariffs would reduce world merchandise trade growth by an additional 0.6 percentage points, posing particular risks for least-developed countries (LDCs), while a spreading of trade policy uncertainty (TPU) would shave off a further 0.8 percentage points. Taken together, the reciprocal tariffs and spreading TPU would lead to a 1.5% decline in world merchandise trade volume in 2025.”
The new estimate of a 0.2% decline in world trade for 2025 is nearly three percentage points lower than it would have been under a “low tariff” baseline scenario, the WTO added, and marks a significant reversal from the start of the year when the trade body’s economists expected to see continued trade expansion supported by improving macroeconomic conditions.
“Risks to the forecast include the implementation of the currently suspended reciprocal tariffs by the United States, as well as a broader spillover of trade policy uncertainty beyond U.S.-linked trade relationships,” the WTO said.
“If enacted, reciprocal tariffs would reduce world merchandise trade growth by an additional 0.6 percentage points, posing particular risks for least-developed countries (LDCs), while a spreading of trade policy uncertainty (TPU) would shave off a further 0.8 percentage points. Taken together, the reciprocal tariffs and spreading TPU would lead to a 1.5% decline in world merchandise trade volume in 2025.”
