WTO's Dire Forecast: Global Trade Faces Decline Amid Tariff Tensions

The World Trade Organization has revised its forecast for global merchandise trade, predicting a decline instead of growth due to U.S. tariffs and their spillover effects. This could be the steepest slump since COVID-19's peak. Concerns grow over China-U.S. decoupling, potentially fragmenting the global economy.

The World Trade Organization (WTO) announced a dramatic cut in its forecast for global merchandise trade, shifting from predicted growth to an expected decline. The revised forecast is driven by increased U.S tariffs and their spillover impacts, marking what could be the sharpest slump of its kind since the height of the COVID-19 pandemic.

WTO Director General Ngozi Okonjo-Iweala expressed major concerns about the downturn, emphasizing that a contraction in merchandise trade growth poses significant risks to global financial markets and wider economic sectors. Okonjo-Iweala also highlighted the dangers posed by the apparent decoupling of Chinese and U.S. economies, warning it could lead to grave global economic fragmentation.

The WTO forecast that, if U.S. tariffs fully return, goods trade growth will further diminish by 1.5%. Despite predicting a 2.5% recovery in 2026, the current outlook is markedly cautious. Implications for service trades and potential opportunities for other nations to bridge the trade gap in the U.S. remain areas of close watch.

(With inputs from agencies.)