Cargo ships and containers in Qingdao Port, Shandong Province, eastern China, on December 4th, 2024.
Stringer | AFP | Getty Images
The World Trade Organization warned on Wednesday that global trade outlook “suddenly worsened” in the wake of President Donald Trump’s tariff regime.
“The outlook for global trade has been sharply deteriorating due to a surge in tariffs and trade policy uncertainty,” the WTO said on Wednesday in its latest “World Trade Outlook and Statistics” report.
Based on the currently in place tariffs, it is expected to fall by 0.2% in 2025, including a 90-day suspension of “mutual tariffs.”
The decline is expected to be particularly sharp in North America, where exports are projected to fall 12.6% this year.
The WTO also warned that “serious shortcomings exist,” including the application of “mutual” tariffs and the application of broader ripples of policy uncertainty.
The recent tariff disruptions followed a strong 2024 world trade year, with commodity trade rising by 2.9% and commercial services trade expanding by 6.8%, according to the WTO.
The new estimate of a 0.2% decline in global trade in 2025 is nearly three percentage points lower than the “low tariff” baseline scenario added by the WTO, indicating a significant reversal from the beginning of the year when trader economists were hoping for a continuous trade expansion supported by improving macroeconomic conditions.
“Risks to forecasts include the implementation of currently suspended mutual tariffs by the United States and the wider outflow of uncertainty in trade policy beyond US-related trade relations,” the WTO said.
“If enacted, mutual tariffs will reduce global commodity trade growth by another 0.6 percentage points, pose certain risks to the least developed countries (LDCs), and the spread of trade policy uncertainty (TPU) will reduce another 0.8 percentage points.
US President Donald Trump will make a statement on April 2, 2025 regarding tariffs at Rose Garden in the White House in Washington, DC.
Carlos Barrier | Reuters
Trump surprised trading partners and global markets in early April. He announced the upstream so-called mutual tariffs on imports from over 180 countries. Beijing was hit hardest of all, with the US obligation to China’s imports now at a virtually 145% total. China was hit in Washington with a retaliation fee of up to 125% on US imports.
Tariffs between China and the US are likely to lead to a “dramatic contraction” of trade between the two, WTO chief economist Ralph Ossa told CNBC’s Sylvia Amaro on Wednesday.
The widespread market turbulence following the tariff announcement has prompted Trump to temporarily climb, and the president last week announced that new obligations on imports from most trading partners will be reduced to 10% for 90 days to allow trade negotiations with Washington counterparts.
In a report on Wednesday, the WTO said the impact of recent trade policy changes is likely to vary widely from region to region.
Adjusted forecasts show that North America is 1.7 percent points minus the overall figures from 2025 global commodity trade growth.
Meanwhile, Asia and Europe continue to contribute aggressively, but less than the baseline scenario, with Asian inputs halving to 0.6% points.
The US-China trade disruption is expected to “cause a serious trade shift,” adding that the WTO has raised concerns among the third market regarding increasing competition with China.
“Exports of Chinese goods are projected to rise by 4% to 9% in all regions except North America as trade is redirected. At the same time, US imports from China are expected to drop sharply in sectors such as textiles, apparel and electrical equipment.
Many WTO members have raised the issue of trade diversion, Ossa said.
“But one very important thing to keep in mind is, when you think about European companies looking to export cars to the US, for example, if you are facing a 25% tariff, you need to find a new destination market for these products. For example, European products may need new customers.
Ossa added that it is important that these effects be managed in a collaborative manner.
– CNBC’s Sophie Kidelin contributed to this report.
