WTO Cuts 2025 Trade Forecast, Warns of Sharpest Decline Since COVID as Tariffs Rise

The World Trade Organization (WTO) has slashed its 2025 global trade growth forecast, citing escalating U.S. tariffs and spillover effects from trade tensions that could trigger the steepest drop in merchandise trade since the 2020 pandemic.

In its latest outlook, the WTO now expects global goods trade to shrink by 0.2% this year—down significantly from its October forecast of 3.0% growth. The revised estimate reflects trade measures implemented as of mid-April.

“I’m very concerned,” said WTO Director General Ngozi Okonjo-Iweala. “This contraction in global trade is troubling, especially for developing nations.”

U.S. President Donald Trump has recently expanded tariffs on steel, vehicles, and a range of imports, intensifying trade friction with China. If fully reinstated, his broader tariffs could slash trade growth by 1.5 percentage points, the WTO said—0.6 points from direct effects and 0.8 from global spillovers.

The WTO is also warning of a potential economic “decoupling” between the U.S. and China, estimating trade between the two could drop by 81%. Without exemptions for key products like smartphones, the drop could’ve hit 91%.

“This fragmentation could reshape the global economy into isolated blocs and cut global GDP by as much as 7% in the long term,” Okonjo-Iweala warned.

Despite a strong showing in 2024—where merchandise trade grew 2.9% and services trade surged 6.8%—the WTO predicts slower commercial services trade growth of 4.0% in 2025 and 4.1% in 2026.

A modest recovery of 2.5% in goods trade is expected in 2026, but forecasts remain cautious amid ongoing volatility in trade policy and global economic uncertainty.