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The volume of world merchandise trade is projected to decline by 0.2 per cent this year—almost three percentage points (pps) lower than it would have been without the recent policy shifts. A modest recovery of 2.5 per cent is expected in 2026.
If enacted, reciprocal tariffs would reduce global merchandise trade growth by an additional 0.6 pps, the blog by Ralph Ossa noted.
A wider spread of trade policy uncertainty could cut growth by a further 0.8 pps. Taken together, these risks would lead to a 1.5-per cent decline in world merchandise trade volume this year, it said.
The disruption in US-China trade is also expected to trigger significant trade diversion, raising concerns among other markets about increased competition from China. As trade is redirected, Chinese merchandise exports are projected to rise by 4-9 per cent across all regions outside North America.
At the same time, US imports from China are expected to fall sharply in sectors such as textiles and apparel, creating new export opportunities for other suppliers able to fill the gap. This could open the door for some least-developed countries to increase their exports to the US market, observed the WTO blog.
World gross domestic product (GDP) is now expected to grow by 2.2 per cent in 2025—0.6 pps below the baseline prediction—before recovering slightly to reach 2.4 per cent in 2026.
The largest impact will again be in North America, where growth is projected to slow by 1.6 pps, followed by Asia (down by 0.4 pps) and South and Central America and the Caribbean (down by 0.2 pps).
While reciprocal tariffs alone would have a limited effect on global GDP, a wider spread of trade policy uncertainty could nearly double the projected GDP loss, bringing it to 1.3 pps below the baseline scenario, the blog added.
Fibre2Fashion News Desk (DS)