According to the latest Global Trade Outlook published by the World Trade Organisation (WTO) on April 16, global trade is expected to decline in 2025, largely due to the reinstatement of tariffs introduced during Donald Trump’s presidency. The WTO forecasts a 0.2% contraction in global trade volumes for 2025, a significant downturn from the previously expected growth of 2.7% in a scenario without added trade restrictions.
If Trump’s paused reciprocal tariffs are reintroduced and additional policy uncertainties are factored in, global merchandise trade growth could shrink by as much as 1.5%, the report states. This shift in trade dynamics is also set to impact global economic growth, with the projected GDP for 2025 now lowered to 2.2%—a drop of 0.6 percentage points from the earlier estimate of 2.8%.
North America is forecast to be the most adversely affected region, with its exports projected to fall by 12.6% and imports by 9.6%. Asia will also experience slower trade growth, with export and import expansion cut nearly in half compared to previous projections.
The WTO notes that service sectors like transport and travel will also slow down, with growth forecasts reduced to 4% and 4.1%, respectively. Even digitally delivered services—where India plays a major role—are expected to decline from 6.6% to 5.6% in 2025.
The report raises alarms over the long-term consequences of escalating trade conflicts, especially between the US and China. If a full-blown trade war resumes, global real GDP could drop by nearly 7% by 2040, with low-income countries facing even steeper losses of over 9%.
Although trade may realign slightly, with some Asian countries increasing exports to the US (excluding China), the overall effect is expected to be detrimental. China itself could witness a drastic 77% reduction in exports to the United States.
In conclusion, the WTO warns that continued trade unpredictability may hinder future trends like friend-shoring, affecting nations like India that stand to gain from global supply chain diversification.
