Global trade outlook has ‘deteriorated sharply' amid Trump tariff uncertainty, WTO warns
The World Trade Organization (WTO) warned on Wednesday that the outlook for global trade has 'deteriorated sharply' in the wake of U.S. President Donald Trump's tariffs regime.
'The outlook for global trade has deteriorated sharply due to a surge in tariffs and trade policy uncertainty,' the WTO said in its latest 'Global Trade Outlook and Statistics' report out Wednesday.
Based on the tariffs currently in place, and including a 90-day suspension of 'reciprocal tariffs,' 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 decline is anticipated to be particularly steep in North America, where exports are forecasted to drop by 12.6% this year.
The WTO also warned that 'severe downside risks exist,' including the application of 'reciprocal' tariffs and a broader spillover of policy uncertainty, 'which could lead to an even sharper decline of 1.5% in global goods trade,' particularly hurting export-oriented, least-developed countries.
The recent tariff disturbances follow a strong year for world trade in 2024, during which merchandise trade grew 2.9% and commercial services trade expanded by 6.8%, the WTO said.
The new estimate of a 0.2% decline in world trade for 2025 is nearly three percentage points lower than it would have been under a 'low tariff' baseline scenario, the WTO added, and marks a significant reversal from the start of the year when the trade body's economists expected to see continued trade expansion supported by improving macroeconomic conditions.
'Risks to the forecast include the implementation of the currently suspended reciprocal tariffs by the United States, as well as a broader spillover of trade policy uncertainty beyond U.S.-linked trade relationships,' the WTO 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 trade policy uncertainty (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.'
Trump stunned trading partners and global markets in early April, when he announced a raft of 'reciprocal' tariffs on imports from more than 180 countries. Beijing was hit the hardest of all, with the U.S. duty on Chinese imports now effectively totaling 145%. China in turn hit back at Washington with retaliatory tariffs of up to 125% on U.S. imports.
Widespread market turbulence following the tariffs announcement prompted a temporary climbdown by Trump, with the president last week announcing that the new duties on imports from most trading partners would be reduced to 10% for 90 days in order to allow for trade negotiations with Washington's counterparts.
The WTO said in its Wednesday report that the impact of recent trade policy changes is likely to vary sharply from region to region.
In the adjusted forecast, North America now subtracts 1.7 percentage points from global merchandise trade growth in 2025, turning the overall figure negative.
Meanwhile, Asia and Europe continue to contribute positively, but less than in the baseline scenario, with Asia's input halved to 0.6 percentage points.
The disruption in U.S.-China trade is expected 'to trigger significant trade diversion,' the WTO added, 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, U.S. 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,' the trade organization remarked, noting that this could open the door for some least-developed countries to increase their exports to the U.S. market.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
25 minutes ago
- The Independent
Nike warns Trump tariffs could cost it nearly £730m
Sportswear giant Nike has warned that US President Donald Trump's trade tariffs could cost it around an extra one billion US dollars (£727 million). The group said it was taking action to offset the hit, having recently warned it would raise prices on some trainers and clothing in the US to counter rising tariffs. Nike also said it would reduce supply from China to the US market to bring down costs. It currently makes around 16% of its footwear in China, which is then imported into the US, but is looking to reduce this to a 'high single-digit range' by the end of the current financial year. Bosses at the group said supply in China would be 'reallocated to other countries around the world'. Matt Friend, Nike's chief financial officer, said: 'These tariffs represent a new and meaningful cost headwind.' He said the cost impact would be about one billion US dollars (£727 million) if tariffs remain at current levels. Mr Friend added: 'We will optimise our sourcing mix and allocate production differently across countries to mitigate the new cost headwind into the United States, despite the current elevated tariffs for Chinese products imported into the United States. 'Manufacturing capacity and capability in China remains important to our global source base.' He also said the group was looking to 'minimise the overall impact to the consumer', although it confirmed it would start pushing through price hikes in the US starting from the autumn. Corporate costs could also be cut under plans to offset the expected cost hit. The comments came as Nike reported its worst quarterly earnings in more than three years, although the out-turn was better than feared on Wall Street, helping its US-listed shares lift overnight on Thursday. Chief executive Elliott Hill, who returned from retirement last year to take the helm, is leading a turnaround at the group. He said the group's results showing a 12% drop in fourth quarter revenues to 11.1 billion dollars (£8.1 billion) were 'not where we want them to be'. 'As we enter a new fiscal year, we are turning the page and the next step is aligning our teams to lead with sport through what we are calling the sport offense,' he said. Mr Friend also said the sales decline 'reflected the largest financial impact' of its revamp, adding 'we expect the headwinds to moderate from here'.
South Wales Guardian
29 minutes ago
- South Wales Guardian
US and China sign trade agreement, Donald Trump says
Commerce Secretary Howard Lutnick told Bloomberg TV that the deal was signed earlier this week. Neither Mr Lutnick nor Mr Trump provided any details about the agreement. 'We just signed with China the other day,' Mr Trump said late on Thursday. Mr Lutnick said the deal was 'signed and sealed' two days earlier. It follows initial talks in Geneva in early May that led both sides to postpone massive tariff hikes that were threatening to freeze much trade between the two countries. Later talks in London set a framework for negotiations and the deal mentioned by Mr Trump appeared to formalise that agreement. Mr Lutnick said: 'The president likes to close these deals himself. He's the dealmaker. We're going to have deal after deal.' China has not confirmed any new agreements, but it announced earlier this week that it was speeding up approvals of exports of rare earths, materials used in high-tech products such as electric vehicles. Beijing's limits on exports of rare earths have been a key point of contention. The Chinese Commerce Ministry said on Thursday that Beijing was accelerating a review of export licence applications for rare earths and had approved 'a certain number of compliant applications'.
Reuters
44 minutes ago
- Reuters
China's Iran oil imports surge in June on rising shipments, teapot demand
SINGAPORE, June 27 (Reuters) - China's Iranian oil imports surged in June as shipments accelerated before the recent conflict in the region and demand from independent refineries improved, analysts said. The world's top oil importer and biggest buyer of Iranian crude brought in more than 1.8 million barrels per day (bpd) from June 1-20, according to ship-tracker Vortexa, a record high based on the firm's data. Kpler's data put the month-to-date average of China's Iranian oil and condensate imports at 1.46 million bpd as of June 27, up from one million bpd in May. The rising imports are fuelled in part by the accelerated discharge of high volumes of Iranian oil on the water after export loadings from Iran reached a multi-year high of 1.83 million bpd in May, Kpler data showed. It typically takes at least one month for Iranian oil to reach Chinese ports. Robust loadings in May and early June mean China's Iran imports are poised to remain elevated, Kpler and Vortexa analysts said. Independent Chinese "teapot" refineries, the main buyers of Iranian oil, also showed strong demand for the discount barrels as their stockpiles depleted, said Xu Muyu, Kpler's senior analyst. A possible relaxing of U.S. President Donald Trump's policy on Iranian oil sanctions could further bolster Chinese buying, she added. Trump said on Wednesday that Washington has not given up its maximum pressure campaign on Iran - including restrictions on Iranian oil sales - but signalled a potential easing in enforcement to help the country rebuild. For this week, Iranian Light crude oil was being traded at around $2 a barrel below ICE Brent for end-July to early-August deliveries, two traders familiar with the matter said, compared to discounts of $3.30-$3.50 a barrel previously for July deliveries. Narrower discounts were spurred by worries that oil flows could be disrupted through the Strait of Hormuz, a critical waterway between Iran and Oman, traders said. Market fears for a closure of the chokepoint had escalated after last weekend's U.S. attack on Iranian nuclear sites but eased after Iran and Israel on Tuesday signalled a ceasefire. Tighter discounts for Iranian oil come amid a retreat in futures prices. ICE Brent crude futures hovered at $68 per barrel on Friday, their level before the Israel-Iran conflict began and down 19% from Monday's five-month peak.
