The World Trade Organization (WTO) has issued a stark warning that global trade is expected to decline in 2025, citing escalating trade tensions driven by US President Donald Trump’s widespread tariff measures. The Geneva-based body has downgraded its trade forecast, now projecting a 0.2% contraction in global goods trade, a reversal from its earlier expectation of 2.7% growth.
The WTO report, released on Wednesday, pointed to “severe downside risks” including retaliatory tariffs, policy uncertainty, and ongoing geopolitical tensions. The decline is expected to be most pronounced in North America, where trade is forecast to shrink by over 10%.
WTO Director-General Ngozi Okonjo-Iweala voiced concern over what she called the “decoupling” of the United States and China, describing it as “a phenomenon that is really worrying to me.” The rift between the two economic powerhouses, exacerbated by tit-for-tat tariff increases, has cast a long shadow over global economic stability.
As of 5 April, the US imposed a 10% baseline tariff on nearly all foreign imports, though some countries and products remain exempt. In response, China has raised tariffs to 145% on most goods from the United States.
WTO chief economist Ralph Ossa noted that tariffs, while politically expedient, often lead to “unintended consequences.” He warned that the uncertainty surrounding trade policy dampens export activity and weakens broader economic momentum.
“Our simulations show that trade policy uncertainty has a significant dampening effect on trade flows, reducing exports and weakening economic activity,” he said.
Adding to the gloomy outlook, the United Nations Conference on Trade and Development (UNCTAD) released its own report the same day, forecasting that global economic growth will slow to 2.3% in 2025 — just below the 2.5% threshold commonly associated with recessionary risk.
The announcement triggered a downturn in US financial markets, with major indices falling amid investor concern over policy unpredictability and a cooling global economy.
Despite the downturn, the WTO noted that some regions, particularly Asia and Europe, are still expected to register modest trade growth in 2025. The organization also introduced its first-ever forecast for services trade, projecting 4% growth — slightly below previous expectations.
President Trump has defended the tariffs as a way to boost American manufacturing, increase tax revenues, and reduce dependence on foreign goods. However, critics argue that rebuilding domestic production capacity is a long-term process and that the immediate impact will likely be higher prices and slower economic growth.
In a sign of mounting pressure, Trump announced a 90-day pause on most of the new tariffs — excluding China — just hours after they took effect earlier this month. The move followed significant opposition from lawmakers and financial markets.
In March, the Governor of the Bank of England warned that US tariff policies could have ripple effects, reducing disposable income for UK households and further straining international trade systems.
