Global trade at risk as tariff war escalates, WTO cautions

Onome Amuge

The World Trade Organization (WTO) has issued a warning, projecting a contraction in global goods trade this year, largely driven by a sharp decline in North American import and export volumes following the US tariff overhaul.

The WTO’s revised forecast marks a substantial downgrade from its initial predictions of continued trade expansion in 2025 and 2026. The shift is attributed to the imposition of widespread tariffs on US imports and retaliatory measures from its trading partners.

According to the WTO, the volume of global goods trade is now expected to fall by 0.2 percent, a downturn from the 2.9 percent growth recorded last year. North America is expected to bear the brunt of this decline, with exports projected to slump by 12.6 per cent and imports by 9.6 per cent.

The WTO’s forecast is based on the tariff landscape as of April 14, and the organisation cautions that further escalation of trade tensions poses severe downside risks. It warns that the introduction of reciprocal tariffs or spillover effects from policy uncertainty could lead to an even sharper decline of 1.5 per cent in global goods trade and adversely affect export-oriented least-developed countries.

“I am deeply concerned by the uncertainty surrounding trade policy, including the US-China stand-off,” stated WTO Director-General Ngozi Okonjo-Iweala.

The current trade dispute sees the US imposing tariffs of 145 per cent on the majority of imports from China, with China retaliating with a 125 per cent levy on imports from the US. The WTO anticipates this situation will trigger trade diversion, with Chinese goods exports projected to grow by 4 per cent to 9 per cent in markets outside North America.

At the same time, the WTO report notes, US imports from China are expected to fall sharply in sectors such as textiles, apparel, and electrical equipment, creating new export opportunities for other suppliers able to fill the gap. However, the organisation also highlights growing concerns in some markets about increased competition from Chinese suppliers, adding that least-developed countries reliant on exports are particularly sensitive to external economic shocks.

While a 90-day pause on many proposed US tariffs, announced by President Donald Trump on April 9, has temporarily relieved some of the pressure on global trade, WTO chief economist Ralph Ossa emphasised that ongoing uncertainty over longer-term trade policy continues to exert a significant dampening effect on trade flows.

“Tariffs are a policy lever with wide-ranging, and often unintended consequences,” Ossa stated. “In a world of growing trade tensions, a clear-eyed view of those trade-offs is more important than ever,” he added.

The WTO’s downbeat forecast aligns with a warning from UN Trade & Development, which suggests that the global economy is on a recessionary trajectory, driven by escalating trade tensions and persistent uncertainty. The agency’s latest report projects global growth to slow to 2.3 per cent this year, as tariffs disrupt supply chains and undermine predictability, leading to delayed investment decisions and reduced hiring.