Global Trade Forecast Revision by WTO
The World Trade Organization (WTO), based in Geneva, has sharply revised its forecast for global merchandise trade volume growth for 2025. Initially anticipating continued expansion, the forecast has been downgraded to a decline of 0.2%, influenced by concerns over U.S. tariff developments.
Key Forecast Details
- The expected 0.2% decline contrasts with a nearly three percentage points higher growth predicted under a low tariff baseline scenario.
- If the situation worsens, trade could shrink further by 1.5% in 2025.
- This is a significant change from 2024, when the merchandise trade volume grew by 2.9%.
Risks and Impact of Tariffs
- Potential U.S. reciprocal tariffs could reduce global trade volume growth by 0.6 percentage points.
- Trade policy uncertainty may further decrease growth by 0.8 percentage points.
- Combined effects could lead to a 1.5% decline in trade in 2025.
WTO's Concerns
Director-General Ngozi Okonjo-Iweala expressed concern about trade policy uncertainties, particularly the U.S.-China stand-off. Despite a temporary ease in tariff tensions, enduring uncertainty threatens global growth, particularly impacting vulnerable economies. The situation urges WTO members to create a level-playing field and streamline decision-making.
Impact on Services Trade
Though not directly affected by tariffs, the growth of global commercial services trade is expected at 4.0%, slower than previously anticipated.
UNCTAD's Economic Outlook
The United Nations Conference on Trade and Development (UNCTAD) forecasts global growth to slow to 2.3% in 2025, a shift towards a recessionary trend. Challenges include subdued demand, trade policy shocks, financial turbulence, and systemic uncertainty, particularly affecting developing countries.
Trade Diversion and Economic Fragmentation
The disruption in U.S.-China trade is expected to cause significant trade diversion, with third markets facing increased competition from China. UNCTAD emphasizes the need for regional and international policy coordination to avoid economic fragmentation and geo-economic confrontations, advocating for resilience through strengthened trade and economic links.