Revised Trade Growth Forecast
- Decline in Global Merchandise Trade: The World Trade Organization (WTO) has revised its global trade growth forecast for 2025, shifting from an expected expansion to a decline of 0.2%. This revision reflects growing concerns over the U.S. tariff developments.
- Previous Growth Expectations: Originally, WTO anticipated continued growth in global merchandise trade for 2025, but this forecast has now been adjusted due to worsening trade conditions.
Potential for Further Decline
- Worst-case Scenario: If trade conditions deteriorate further, WTO predicts that global merchandise trade could contract by 1.5% in 2025. This is a stark contrast to 2024, when global trade grew by 2.9%.
- Impact of U.S. Tariffs: If the U.S. proceeds with reciprocal tariffs, WTO estimates a reduction of 0.6 percentage points in global trade growth for 2025.
- Trade Policy Uncertainty: Additional uncertainty surrounding trade policies could further reduce growth by another 0.8 percentage points. Combined, these factors would contribute to a 1.5% decline in global trade.
Broader Economic Implications
- UNCTAD’s Global Growth Forecast: The United Nations Conference on Trade and Development (UNCTAD) has projected global growth to slow to 2.3% in 2025, indicating a shift toward recessionary conditions.
- Risks for Developing Countries: Developing nations are expected to face intensified pressures due to subdued demand, trade policy shocks, financial turbulence, and systemic uncertainty.
Key Risks
- Tariffs and Policy Shocks: The spreading trade policy uncertainty and the potential for tariff wars, especially involving major economies like the U.S. and China, pose significant risks to global trade.
- Economic Slowdown: A contraction in global trade will likely exacerbate the already slow global economic recovery, particularly impacting developing economies heavily reliant on trade.
The WTO’s revised trade growth forecast reflects increasing risks to global trade in 2025, with U.S. tariff policies and trade uncertainty acting as key contributors to a potential decline in merchandise trade. Additionally, broader economic challenges, including slower global growth, will particularly affect developing countries, intensifying their vulnerability to trade shocks.
