Malaysia
Singapore
Philippines
Stay connected with BizTech Community—follow us on Instagram and Facebook for the latest news and reviews delivered straight to you.
Global trade is bracing for impact. The World Trade Organization has sharply downgraded its 2025 outlook, warning that Donald Trump’s aggressive tariff push could shrink trade by as much as 1.5%. That’s a steep reversal from its earlier forecast of 2.7% growth.
In its latest global report, the WTO cites rising tariffs and erratic trade policy from Washington as key drivers of the downturn. Under the worst-case scenario, global GDP growth could tumble to 1.7%—down from the prior 2.8% estimate. WTO Director-General Ngozi Okonjo-Iweala didn’t mince words, flagging the rising risk of a full-scale decoupling between the U.S. and China. Without exemptions for essential tech like smartphones, trade between the two could collapse by 81–91%.
“We’re witnessing a troubling shift,” she said, with the WTO now exploring whether to call an emergency meeting to manage the fallout.
Trump’s Tariffs Upend Global Trade Stability
At the heart of the disruption are Trump’s sweeping new tariffs: a 10% flat duty on all imports, plus steep penalties—up to 145%—on goods from China, autos, and steel. Though some duties have been paused for 90 days following market backlash, the WTO warned that if fully reinstated, these measures could lead to a 0.8% drop in global goods trade.
Even without a full reset of tariffs, the WTO now sees goods trade contracting by 0.2% in 2025, down from a previously expected 3.0% expansion. It’s a sharp downgrade—and one that reflects the gravity of the situation.
Uncertainty is a major factor. Mixed signals from the U.S. administration since Trump’s “liberation day” tariff announcement on April 2 have left markets jittery. “Uncertainty fosters caution,” the WTO said, pointing to weakened business confidence and reduced investment as key knock-on effects.
U.S.-China Trade on the Brink of Collapse
The WTO estimates that merchandise trade between the U.S. and China could fall by up to 91% without recent carveouts for major tech products. Even with exemptions, the drop is expected to be around 81%.
That kind of economic decoupling would have deep consequences. Global GDP could shrink by 7% in the long run, the WTO said—a hit they describe as “significant and substantial.” Services trade, though not directly impacted by tariffs, would also suffer as lower goods demand drags down logistics, transport, and travel.
And while some economies may benefit from redirected trade—China is expected to increase exports to markets outside North America by 4–9%—the gains are unlikely to offset the broader damage. Countries like Vietnam, Mexico, and India may fill part of the gap in sectors like textiles and electrical goods, but the global supply chain isn’t easily rebuilt overnight.
Fragile Recovery Outlook Ahead
The WTO is now forecasting a modest recovery in 2026, with merchandise trade growing 2.5%. Services trade is projected to grow 4.0% in 2025 and 4.1% in 2026—both well below prior expectations of 5%+ growth.
This comes off a strong 2024, where goods trade grew 2.9% and services surged 6.8%. But as Hector Torres, former IMF executive, put it: “Forecasting a credible baseline scenario has become virtually impossible.”
He warned that the erosion of a rules-based system has given way to a “deals-based disorder,” where outcomes hinge on how effectively governments can negotiate with Trump’s White House.
Earlier the same day, the UN’s trade and development agency also cut its global growth forecast to 2.3%, citing similar concerns over rising protectionism and investor unease.
Final Take
The message from the WTO is clear: the rules of global trade are being rewritten—and not in a way that inspires confidence. With tariffs rising, policy consistency evaporating, and U.S.-China ties fraying, the risks to the global economy are growing fast.
For businesses, investors, and governments, the path forward looks volatile. The global trading system is entering a new phase—one where deals, not rules, drive outcomes. And that makes navigating the next year more uncertain than ever.
