Dark clouds are once again gathering over the global economy. What was expected to be a year of recovery is now shaping up to be a year of contraction. The outlook has dimmed considerably.
According to the latest forecast from the World Trade Organization, global trade will shrink in 2025, reversing earlier expectations of a 3% increase. The WTO now projects a 0.2% decline in world merchandise trade this year.
The downgrade is stark. As recently as October 2024, the WTO had forecast a 3% expansion. The shift is largely attributed to US President Donald Trump's sweeping tariffs, as well as retaliatory measures from other major economies. If trade tensions escalate further and reciprocal tariffs continue to mount, the WTO warns that global trade could contract by as much as 1.5%.
Another factor adding to the pressure is heightened geopolitical uncertainty. WTO analysts say export-oriented economies are likely to suffer the most, with North America facing the steepest projected decline. Exports from the region are expected to fall by 12.6%.
At the same time, there is a silver lining. Global trade in services is expected to grow by 4% in 2025, although this figure is still below previous estimates.
Earlier, Chinese Commerce Minister Wang Wentao warned that Trump's tariffs could trigger a humanitarian crisis. Developing countries, in particular, could face severe economic fallout from the trade conflict, he added.
