Volume of World Merchandise to Drop by 0.2%

The outlook for global trade has deteriorated sharply due to a surge in tariffs and trade policy uncertainty (TPU), according to World Trade Organisation (WTO).

In its report entitled Global Trade Outlook and Statistics for April 2025, WTO said that based on the measures in place as of 14 April, including the suspension of “reciprocal tariffs” by the US, the volume of world merchandise trade is now expected to decline by 0.2% in 2025 before posting a modest recovery of 2.5% in 2026.

The new estimate for 2025 is nearly three percentage points lower than it would have been without recent policy shifts, and marks a significant reversal from the start of the year, when WTO economists expected to see continued trade expansion supported by improving macroeconomic conditions.

Risks to the forecast included the implementation of the currently suspended reciprocal tariffs by the US, as well as a broader spill over of trade policy uncertainty beyond US-linked trade relationships, the report said.

If enacted, reciprocal tariffs would reduce world merchandise trade growth by an additional 0.6 percentage points, posing particular risks for least-developed countries (LDCs), while a spreading of TPU would shave off a further 0.8 percentage points.

“Taken together, the reciprocal tariffs and spreading TPU would lead to a 1.5% decline in world merchandise trade volume in 2025,” the WTO report said.

The impact of recent trade policy changes varied sharply across regions. In the adjusted forecast, North America now subtracts 1.7 percentage points from global merchandise trade growth in 2025, turning the overall figure negative.

Asia and Europe continue to contribute positively but less than in the baseline scenario, with Asia’s contribution halved to 0.6 percentage points. The combined contribution of other regions – Africa, the Commonwealth of Independent States (CIS), including certain associate and former member states, the Middle East, and South and Central America and the Caribbean – also declined but remained positive.

The disruption in the US-China trade is expected to trigger significant trade diversion, raising concerns among third markets about increased competition from China. Chinese merchandise exports are projected to rise by 4% to 9% across all regions outside North America as trade is redirected.

At the same time, the US imports from China are expected to fall sharply in sectors such as textiles, apparel and electrical equipment, creating new export opportunities for other suppliers able to fill the gap.

This could open the door for some least-developed countries (LDCs) to increase their exports to the US market.

Services Trade

Services trade, though not directly subject to tariffs, is also expected to be adversely affected as tariff induced declined in goods trade weaken demand for related services such as transport and logistics, while broader uncertainty dampens discretionary spending on travel and slows investment-related services.

As a result, the global volume of commercial services trade is now forecast to grow by 4% in 2025 and 4.1% in 2026 – well below baseline projections of 5.1% and 4.8%.

“These figures are part of a new element in our analysis: for the first time, this report includes projections for commercial services trade, complementing our long-standing merchandise trade estimates,” WTO said.

The WTO economists expect world GDP at market exchange rates to grow by 2.2% in 2025 – 0.6 percentage points below the no-tariff-change baseline – before slightly recovering to 2.4% in 2026. Tariff changes are forecast to have the largest impact on North America (-1.6 percentage points), followed by Asia (-0.4 points) and South and Central America and the Caribbean (-0.2 points).

While the imposition of reciprocal tariffs would have a limited effect on the global figure, a wider spread of trade policy uncertainty could nearly double the GDP loss to 1.3 percentage points relative to the baseline.

The recent downturn in trade prospects follows a strong performance in 2024, when the volume of world merchandise trade grew by 2.9% and commercial services trade expanded by 6.8%. With global GDP rising by 2.8% at market exchange rates, it was the first year since 2017 – excluding the post-pandemic rebound – where merchandise trade growth outpaced output.

In value terms, world merchandise exports increased by 2% to $24.43 trillion, indicating a decline in average export and import prices. Commercial services exports rose by 9% to $ 8.69 trillion, reflecting strong demand across a range of sectors, the report noted.