The World Trade Organization (WTO) has sounded the alarm on a potential contraction in global trade for 2025, attributing the downturn to intensified trade disputes fueled by expansive U.S. tariff policies under President Donald Trump. In a revised forecast released this week, the WTO now anticipates a 0.2% decline in global goods trade, a sharp reversal from its earlier projection of 2.7% growth.
The Geneva-based organization highlighted “significant risks” to the global economy, including retaliatory trade measures, policy unpredictability, and persistent geopolitical frictions. North America is expected to bear the brunt of the decline, with trade volumes projected to drop by more than 10% in 2025.
WTO Director-General Ngozi Okonjo-Iweala expressed deep concern over the growing economic divide between the U.S. and China, describing it as a troubling trend with far-reaching consequences. The escalating tariff war between the two nations has heightened fears of economic instability worldwide.
As of early April, the U.S. implemented a 10% tariff on most foreign imports, with select exemptions for certain countries and goods. In retaliation, China imposed tariffs as high as 145% on a wide range of U.S. products, further straining bilateral trade relations.
WTO chief economist Ralph Ossa cautioned that while tariffs may serve short-term political goals, they often trigger unintended economic fallout. “Trade policy uncertainty acts like a brake on global commerce, stifling exports and sapping economic vitality,” Ossa said, citing simulations that underscore the chilling effect of such measures.
The United Nations Conference on Trade and Development (UNCTAD) echoed the WTO’s concerns in a separate report, predicting global economic growth will slow to 2.3% in 2025, teetering close to levels associated with recession risks. The combined warnings sent shockwaves through U.S. financial markets, with major stock indices sliding as investors grappled with fears of economic slowdown and policy volatility.
Despite the grim outlook, the WTO noted that parts of Asia and Europe may still see modest trade gains in 2025. The organization also offered a glimmer of optimism in its inaugural services trade forecast, projecting a 4% rise, though this falls short of earlier estimates.
President Trump has championed the tariffs as a strategy to revitalize U.S. manufacturing, bolster federal revenues, and reduce reliance on imported goods. Critics, however, argue that rebuilding domestic industries is a complex, long-term endeavor, and the immediate effects—higher consumer prices and sluggish growth—could outweigh short-term benefits.
In response to mounting criticism, Trump recently announced a temporary 90-day suspension of most new tariffs, excluding those targeting China. The decision, which came shortly after the tariffs took effect, followed pushback from lawmakers and market analysts alarmed by the policies’ economic toll.
Across the Atlantic, the Bank of England’s governor warned last month that U.S. trade policies could have global repercussions, potentially squeezing household incomes in the UK and adding strain to international trade networks.
As the world braces for a challenging year ahead, the WTO’s latest report underscores the fragile state of global commerce and the urgent need for cooperative solutions to avert further economic disruption.
