Donald Trump’s tariffs will make global trade shrink, says WTO
The World Trade Organization (WTO) has recently made a forecast that global trade will experience a decline this year due to the imposition of tariffs by US President Donald Trump. The organization highlighted “severe downside risks” such as reciprocal tariffs and political uncertainty, which could further worsen the situation leading to a more significant drop in global goods trade.
In a press conference held in Geneva on Wednesday, WTO chief Ngozi Okonjo-Iweala expressed her concerns about the “decoupling” of the US and China, describing it as a worrying phenomenon. The WTO had initially projected a 2.7% expansion in global goods trade for 2025, but now anticipates a decline of 0.2% instead.
Chief economist Ralph Ossa emphasized the unintended consequences of tariffs, stating that trade policy uncertainty has a substantial dampening effect on trade flows, resulting in reduced exports and weakened economic activity. Additionally, the United Nations trade and development body, UNCTAD, released a report on the same day forecasting a slowdown in global growth to 2.3% in 2025 due to escalating trade tensions and uncertainty, which is below the 2.5% threshold indicating a potential global recession.
Despite the predicted decline in trade with the US, the WTO remains optimistic about some regions experiencing trade growth. Asia and Europe are expected to post modest growth in both exports and imports this year. The report also includes a forecast for services trade, which is projected to grow by 4% in 2025, slightly lower than previous expectations.
Since Trump’s inauguration, there have been numerous announcements on tariffs, with the president advocating for import taxes to boost domestic manufacturing and increase tax revenue. However, critics argue that bringing manufacturing back to the US is a complex process that could take years, impacting the economy in the meantime. Trump has also reversed many of his tariff announcements, including a recent 90-day pause on tariffs to all countries except China following opposition from various sectors.
In conclusion, the global trade landscape is facing challenges due to escalating trade tensions and uncertainty surrounding tariffs. The WTO and other international organizations are closely monitoring the situation and providing forecasts to guide policymakers and businesses in navigating these turbulent times.
