WTO warns of deeper slump amid trade war
The World Trade Organisation sharply cut its forecast for global merchandise trade from solid growth to a decline on Wednesday, saying further US tariffs and spillover effects could lead to the heaviest slump since the height of the Covid pandemic.
The WTO said it expected trade in goods to fall by 0.2% this year, down from its expectation in October of 3.0% expansion. It said its new estimate was based on measures in place at the start of this week. "I'm very concerned, the contraction in global merchandise trade growth is of big concern," WTO Director General Ngozi Okonjo-Iweala told reporters in Geneva.
US President Donald Trump imposed extra duties on steel and car imports as well as more sweeping global tariffs before unexpectedly pausing higher duties on a dozen economies. His trade war with China has also intensified with tit-for-tat exchanges pushing levies on each other's imports beyond 100%.
The WTO said that, if Trump reintroduced the full rates of his broader tariffs that would reduce goods trade growth by 0.6 percentage points, with another 0.8 point cut due to spillover effects beyond US-linked trade.
Taken together, this would lead to a 1.5% decline, the steepest drop since 2020. "If we have contraction in global merchandise the concern is spill over into broad GDP growth. We've seen that the trade concerns can have negative spill overs into financial markets, into other broader areas of the economy," Okonjo-Iweala added.
She also raised alarm about the impact on developing countries.
The head of the WTO said her greatest fear was that the economies of China and the US were de-coupling from one another.
The WTO estimates that merchandise trade between them will fall by 81% — a drop that could have reached 91% without recent exemptions for products such as smartphones.
"A decoupling could have far reaching consequences if it were to contribute to a broader fragmentation of the global economy along geopolitical lines to two isolated blocks," Okonjo-Iweala said. In this scenario, global GDP could shrink by 7% in the long term, which the director general described as "significant and substantial".
"The unprecedented nature of the recent trade policy shifts means that predictions should be interpreted with more caution than usual," said the WTO, which is also forecasting a modest recovery of 2.5% in 2026.
"Forecasting a credible baseline scenario has become virtually impossible," Hector Torres, a former executive director of the International Monetary Fund, told Reuters.
"The remnants of a deteriorated 'rules-based' trading system are giving way to a capricious 'deals-based' disorder, where any projections hinge on government's capacity to strike bilateral deals with the Trump Administration," Torres said.
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The writer is former Dean Faculty of Social Sciences, University of Karachi and can be reached at amoonis@ Listen to article When survival of a country or an organisation is at stake, strategies to deal with a crisis situation are adopted. Composed of strategic planning and strategic thinking, those trying to manage a crisis must possess required skills to deal with a situation of critical nature in a strategic manner. According to Merriam Webster Dictionary, strategy means, "the science and art of employing the political, economic, psychological, and military forces of a nation or group of nations to afford the maximum support to adopted policies in peace or war." Strategic crisis management is an innovative term and a concept which aims to professionally deal with a dangerous situation skillfully. According to AI overview, "Strategic crisis management is a proactive and integrated approach to preparing for, responding to, and recovering from crises. It involves embedding crisis management into an organization's overall strategic planning process, rather than treating it as an isolated function. This approach focuses on minimizing the impact of crises by anticipating potential threats, developing comprehensive response strategies, and fostering effective communication and collaboration." Crises in Gaza, Ukraine and Iran-Israel as well as the US-Iran relations and the Indo-Pak relations, apart from global economic problems, require strategy for their effective management. Likewise, economic crisis, political schism, water crisis and environmental crisis requires proper management skills with strategic foresight and vision. According to Everbridge, "Crisis management is an organization's process and strategy-based approach for identifying and responding to a critical event. A critical event can be defined as any threat, unanticipated incident, or negative disruption with the potential to impact an organization's people, property, or business processes. Being prepared to respond to and recover from a critical event requires a sophisticated crisis management plan. Prioritizing crisis management also helps organizations mitigate the secondary consequences of critical events. Establishing a plan can help organizations move from a position of reactivity to proactively safeguarding against all the effects a critical event can have on an organization." The concept of strategic crisis management can only be understood and applied in a society which is educated and enlightened and possess analytical skills and critical thinking. When concepts like strategy, crisis and management are rooted in the mindset of people, one can expect a country to deal with issues that pose threat to its survival. For example, economic predicament of Pakistan is a perennial issue. If Pakistan is economically fragile, it will have its impact on politics, governance and foreign policy. Had there been a focus on the part of Pakistan's leadership on seeking excellence in strategic crisis management, the country would have been on the list of 20 top economies of the world. But, the reality on the ground is different because Pakistan's internal and external debt burden is around 250 billion dollars; its foreign exchange reserves held by the central bank amount to 15 billion dollars, exports are 30 billion dollars annually, per capita income is 1,700 dollars, GDP is 373 billion dollars, income from tourism is less than one billion dollars a year and remittances are worth 32 billion dollars annually. Most of the state institutions like PIA and Steel Mill possess a debt of 200 billion rupees. There is a direct link between economy and politics. As long as Pakistan is under political crisis, it will negatively impact its economy, governance, rule of law and foreign policy. The dearth of strategic thinkers and crisis managers in Pakistan mitigates hope to transform it as a vibrant state. In FY2025-26 Pakistan needs to return more than 22 billion dollars of foreign debt which will put enormous pressure on its economy. Strategic crisis management requires the leadership to have the qualities of hard work, intelligence, integrity, commitment, planning, management and vision. This also requires reversing the culture of corruption and nepotism. Strategic crisis management needs to be examined and analysed from three angles. First, the need to have a critical mass emerging from educational institutions having knowledge of strategy and crisis management is essential. Training, advocacy and best practices in a society also contribute towards training people capable of understanding and managing a crisis. Pakistan's dilemma is that its elites are devoid of commitment and professional expertise in strategy and crisis management. Those controlling the instruments of power formulate policies on an ad hoc basis without learning lessons from past mistakes. They also lack the commitment to learn from successful models of crisis decision-making i.e. how leadership in such countries is able to focus on right kind of strategy and apply it to manage a crisis. For instance, G7 that is composed of the world's most industrialised and affluent countries meet every year to assess strategy to meet challenges and crises and conduct brainstorming for effective decision-making in order to maintain their edge in global order. Likewise, every year, there is Munich security dialogue primarily consisting of Western powers to formulate a strategy to deal with threats and manage security crisis. The relative success of G-7 and China in dealing with crises is by pursuing a policy of strategic statesmanship. Second, when in 1971 Pakistan was facing a grave crisis threatening its very survival and its eastern wing was facing a civil war, elites governing power were oblivious of the situation and their strategy lacked foresight, statesmanship and vision. When the country was being dismembered, its rulers behaved in an irresponsible manner. Had a proper strategy been pursued by the Martial Law regime of General Yahya Khan and West Pakistan political parties by summoning the National Assembly in Dhaka on March 3, 1971 and a military operation had not been launched to deal with the political crisis, the country would have been saved. The 1977 crisis, which plunged Pakistan in violence and disorder could have been averted had the general elections been transparent and the then Prime Minister ZA Bhutto and the Pakistan National Alliance (PNA) had prioritised the interests of the country rather than their own political objectives. The country could have been saved from what turned out to be longest spell of martial law in the country. Pakistan lacked strategic crisis management to deal with the 1977 crisis. Finally, the role of policy-oriented think tanks and academia is pivotal in inculcating the concept of strategic crisis management at the institutional and individual level. When a critical mass is created to deal with a crisis situation in a strategic manner, one can expect its proper management. This critical mass so far is lacking in Pakistan.
