The World Trade Organization slashed its forecast for merchandise trade this year as soaring US tariffs and broader uncertainty hammer international commerce. The Geneva-based WTO expects the volume of world merchandise trade to decline by 0.2% in 2025 – almost three percentage points lower than it would have been without the US-led trade war, marking a dramatic reversal from expectations at the start of the year.Trade is forecast to rebound by 2.5% in 2026.
Two weeks ago, Trump announced reciprocal import taxes ranging from 10% to 50%, though days later he suspended the highest rates for 90 days and kept 10% as the floor for all countries except China, whose exports to the US now face duties in excess of 100%. The reprieve was aimed at giving bilateral negotiations time to play out, and a delegation from Japan is visiting the White House for talks on Wednesday.
In the WTO’s forecasts, this year’s contraction will be even worse if the US pushes ahead with those higher levels of reciprocal tariffs. “Together, reciprocal tariffs and spreading trade policy uncertainty would lead to a 1.5% decline in world merchandise trade in 2025,” the WTO said in its report Wednesday.
While protectionist policies may boost domestic production, raise revenue and narrow trade imbalances – all three of which are Trump’s stated goals – the WTO said that “over the medium to long term, higher import tariffs generally have net negative effect on economic activity and trade.”