Trump’s tariffs will shrink global trade in 2025: WTO

Geneva: The World Trade Organisation (WTO), in its Global Trade Outlook released on 16 April, projected that global trade by volume will contract by 0.2% in 2025 due to tariffs imposed by former US President Donald Trump as of April 14. This is a stark reversal from the 2.7% growth that would have occurred under a baseline scenario with no new trade restrictions.

The WTO report warned that if Trump reinstates his previously paused reciprocal tariffs, global merchandise trade growth could shrink by up to 1.5%, factoring in an additional 0.8 percentage point loss from heightened trade policy uncertainty. The overall global GDP is now forecast to grow at only 2.2% in 2025, compared to the earlier baseline of 2.8%, indicating a 0.6 percentage point reduction due to the ripple effects of Trump’s trade policies.

North America is expected to be the largest drag on global trade, with exports and imports contracting by 12.6% and 9.6% respectively in the revised scenario. Asia’s trade growth will also be sharply affected, with both exports and imports expected to grow only 1.6% instead of 3.3% and 3.2%.

The WTO also noted that commercial services trade will slow down as well. Growth projections for services such as transport and travel have been cut from 5.1% and 4.8% to 4% and 4.1% for 2025 and 2026. Digitally delivered services, where India is a key player, are forecast to decline from 6.6% to 5.6%.

The report cautioned about long-term global economic damage from an extended trade war between the US and China. A full tariff escalation combined with rising non-tariff barriers and uncertainty could reduce global real GDP by nearly 7% by 2040, with low-income economies facing losses exceeding 9%.

While the WTO expects some trade realignment, including increased exports to the US from Asia excluding China, the overall effect is expected to be negative due to an increase in Chinese exports to other global markets. China itself could suffer a 77% decline in exports to the US.

The WTO concluded by warning that the volatile and unprecedented nature of the current trade policy environment makes forecasting difficult and that rising uncertainty may also weaken the momentum of friend-shoring—a trend expected to benefit countries like India.