The World Trade Organization (WTO) has warned that global trade is expected to shrink in 2025 due to the escalating tariff war driven by U.S. President Donald Trump’s recent policies.
Since returning to office, Trump has imposed a 10% tariff on global imports, and higher duties of 25% on steel, aluminum, and cars. The situation has worsened with a 145% tariff on Chinese goods, prompting China to retaliate with 125% duties on U.S. products.
WTO Director-General Ngozi Okonjo-Iweala expressed deep concern, highlighting an expected 81% drop in U.S.-China trade volumes. “Uncertainty is stalling global growth and hitting the most vulnerable economies hardest,” she stated.
Initially, the WTO had projected global trade to grow steadily in 2025 and 2026. However, its latest outlook shows a 0.2% decline for 2025, with only a modest 2.5% recovery predicted for 2026. The outlook could worsen, with trade potentially shrinking by 1.5% if tensions rise further.
Service trade, while not directly hit by tariffs, is also expected to slow, with growth forecasts trimmed to 4.0%.
Regional Impacts:
- North America: Exports down 12.6%, imports down 9.6%
- Asia: Slight growth, with 1.6% increases in both exports and imports
- China: Exports projected to grow 4–9% globally, except in North America
- Europe: Export growth of 1%, import growth of 1.9%
The WTO forecasts global GDP growth at 2.2% in 2025 and 2.4% in 2026. While direct tariff impacts on GDP remain limited, Okonjo-Iweala warned that the deepening U.S.-China split could lead to long-term economic fragmentation, potentially cutting global GDP by 7% by 2040.
She urged WTO reforms to improve decision-making and adapt to modern trade challenges, saying, “We shouldn’t waste this crisis.”
