GENEVA, April 16 – The World Trade Organization (WTO) on Wednesday sharply downgraded its forecast for global merchandise trade, projecting a 0.2% contraction in 2025, compared with its previous estimate of 3.0% growth, citing escalating U.S. tariffs and growing fears of U.S.-China economic decoupling.
“This contraction is of big concern,” WTO Director-General Ngozi Okonjo-Iweala told reporters, warning of significant risks to global economic stability. “Trade concerns can have negative spillovers into financial markets and broader areas of the economy.”
The WTO said the revised forecast is based on current trade measures and could worsen if the United States reinstates full tariffs previously paused under President Donald Trump. New U.S. duties on steel, cars, and a broad range of imports, coupled with retaliatory tariffs from China, have pushed bilateral levies above 100%.
If the U.S. fully reimposes broader tariffs, merchandise trade could fall by an additional 0.6 percentage points, with spillover effects potentially shaving off a further 0.8 points. The combined impact could lead to a 1.5% decline in global goods trade — the steepest drop since 2020, during the height of the COVID-19 pandemic.
The WTO also flagged the risk of a deepening rift between the world’s two largest economies, warning that U.S.-China trade could shrink by as much as 81%, and up to 91% without recent exemptions for key goods such as smartphones.
“A decoupling could have far-reaching consequences if it leads to a broader fragmentation of the global economy into two isolated blocs,” said Okonjo-Iweala. In such a scenario, global GDP could shrink by as much as 7% over the long term — a hit the WTO described as “significant and substantial.”
In a separate report, the United Nations Trade and Development agency also projected global economic growth to slow to 2.3% in 2025 due to trade tensions and growing economic uncertainty.
The WTO forecast a modest recovery in global trade in 2026, with merchandise trade expected to grow by 2.5%. However, it cautioned that “the unprecedented nature of recent trade policy shifts means predictions should be interpreted with more caution than usual.”
The WTO noted that disruptions in U.S.-China trade could spur Chinese exports to other regions outside North America by 4% to 9%, while other countries may benefit from increased U.S. demand in sectors like textiles, apparel, and electrical goods.
Services trade, though not directly affected by tariffs, is also expected to feel the strain due to weaker demand tied to goods trade. Spending on transport, logistics, travel, and investment-related services is likely to decline amid broader economic uncertainty. Commercial services trade is now projected to grow by 4.0% in 2025 and 4.1% in 2026 — both below previous baseline forecasts of 5.1% and 4.8%, respectively. In contrast, 2024 had shown signs of resilience, with global merchandise trade expanding by 2.9% and services trade jumping by 6.8%, the WTO said.
