WTO warns Trump tariffs could cut world trade 1.5% in 2025 | World News

Global trade could shrink as much as 1.5 per cent this year if Donald Trump’s sweeping tariff policies trigger a broader wave of trade policy uncertainty, the World Trade Organization has warned — marking a stark reversal from earlier projections.In its latest global outlook, the WTO said it had previously expected goods trade to grow 2.7 per cent in 2025. That forecast has now been slashed to a 0.2 per cent decline, driven a sharp rise in tariffs and increasingly unpredictable trade policy decisions from Washington.
The most severe scenario modelled the Geneva-based body shows a 1.5 per cent drop in trade, coupled with global GDP growth falling to just 1.7 per cent — a significant downgrade from its earlier 2.8 per cent estimate.
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Presenting the figures, WTO director general Ngozi Okonjo-Iweala voiced particular concern about the growing divide between the US and China, warning of “a phenomenon that is really worrying to me”. She said trade between the two countries could collapse between 81 and 91 per cent without exemptions for key technology products such as smartphones — a shift she described as “tantamount to a decoupling of the two economies” with “far-reaching consequences”.
The WTO is currently canvassing its member countries on whether to convene an emergency meeting to address the fallout.
In its report, the WTO stated: “The outlook for global trade has deteriorated sharply due to a surge in tariffs and trade policy uncertainty.”
Much of the disruption stems from Trump’s new trade measures, including a 10 per cent blanket tariff on all imports and significantly higher rates — up to 145 per cent — on goods from China and targeted sectors such as automobiles and steel.Story continues below this ad
While trade with regions outside the US is expected to continue growing modestly, the WTO anticipates a sharp contraction in trade flows involving the US itself.
Trump’s far more aggressive “reciprocal” tariffs, announced earlier this month, initially triggered a violent reaction in financial markets and were paused for 90 days. But the WTO warned that if those tariffs are reimposed, the damage would deepen, potentially leading to a 0.8 per cent decline in global goods trade.
The report also pointed out the economic cost of uncertainty, noting that mixed and sometimes contradictory statements from the US adminration following Trump’s “liberation day” tariff announcement on 2 April have further rattled global markets.
“Uncertainty fosters an increased prudence in decision-making,” the WTO warns, adding: “Trade policy uncertainty can, among other things, dampen business confidence, reducing business investment and there impairing economic growth.”Story continues below this ad
It concludes: “Ultimately, the degree to which uncertainty can be managed firms will be a key determinant of whether the positive macroeconomic momentum observed in 2024 translates into sustained global trade growth in the coming years.”
The World Bank and the International Monetary Fund have also raised the alarm. World Bank president Ajay Banga said that rising uncertainty would dampen global growth, and urged developing nations to work with neighbours and the US to roll back tariffs: “The quicker we do it, the better.”
He noted that tariffs are often higher in the developed world and linked to the outsourcing of jobs — a model that, he argued, has held back the growth of more resilient and self-sufficient economies.
The WTO expects some trade diversion as China seeks to reorient its exports. Chinese trade with markets outside North America is forecast to increase between 4 and 9 per cent in 2025.Story continues below this ad
While services trade is not directly targeted the new tariffs, the WTO warns it will suffer indirect effects. “Tariff induced declines in goods trade weaken demand for related services such as transport and logics, while broader uncertainty dampens discretionary spending on travel and slows investment-related services.”
The WTO’s own authority has been increasingly tested in recent years, as protectionism and stalled globalisation have chipped away at the effectiveness of its rules-based system.
Trump’s new tariffs also fly in the face of one of the WTO’s core principles: the “most favoured nation” rule, which states that any trade advantage granted to one member must be extended to all.
China has formally urged the WTO to investigate the US measures, saying in a statement: “Reciprocal tariffs are not – and will never be – a cure for trade imbalances. Instead, they will backfire, harming the US itself.”
(With Inputs from Reuters)