Temporary tariff pause mitigates trade contraction, but strong downside risks persist: WTO

THE volume of world merchandise trade is expected to decline by 0.2% in 2025 under current conditions, nearly 3% lower than what would have been expected under a "low tariff" baseline scenario, according to the World Trade Organisation (WTO) Secretariat's latest Global Trade Outlook and Statistics report released on 16 April.

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This is premised on the tariff situation as of 14 April.

Trade could shrink even further, to-1.5% in 2025, if the situation deteriorates.

The services trade, though not directly subject to tariffs, is also expected to be adversely affected, with the global volume of commercial services trade now forecast to grow by 4.0%, slower than expected.

Director-General Ngozi Okonjo-Iweala said: "I am deeply concerned by the uncertainty surrounding trade policy, including the US-China stand-off. The recent deescalation of tariff tensions has temporarily relieved some of the pressure on global trade. However, the enduring uncertainty threatens to act as a brake on global growth, with severe negative consequences for the world-the-most vulnerable economies in particular. In the face of this crisis, WTO members have the unprecedented opportunity to inject dynamism into the organisation, foster a level-playing field, streamline decision-making, and adapt our agreements to better meet today's global realities." At the start of the year, the WTO Secretariat expected to see continued expansion of world trade in 2025 and 2026, with merchandise trade growing in line with world GDP and the commercial services trade increasing at a faster pace. However, the large number of new tariffs introduced since January prompted WTO economists to reassess the trade situation, resulting in a substantial downgrade to their forecast for merchandise trade and a smaller reduction in their outlook for the services trade.

Risks to the forecast

Risks to the merchandise trade forecast persist, particularly from the reactivation of the suspended "reciprocal tariffs" by the US, as well as the spread of trade policy uncertainty that could impact non-US trade relationships.