The WTO has calculated how much the continuation of the customs war may cost world trade
17 April 08:49
The outlook for global trade has deteriorated sharply due to rising tariffs and uncertainty in trade policy. This is stated in the latest WTO report “World Trade Prospects and Statistics,” "Komersant Ukrainian" reports.
The World Trade Organization predicts that, given the current tariffs and the 90-day suspension of reciprocal tariffs, global trade in goods may decline by 0.2% in 2025, before resuming growth in 2026.
The WTO also warns that “there are serious risks” that could lead to a deterioration in the situation. These include the imposition of “reciprocal” tariffs and even greater political uncertainty, “which could lead to an even sharper drop in world trade by 1.5%. And this will be felt primarily by export-oriented and least developed countries.
“The application of reciprocal tariffs would reduce the growth of world merchandise trade by an additional 0.6 percentage points, posing a particular risk to the least developed countries, while the spread of trade policy uncertainty would reduce growth by about 0.8 percentage points. Together, this will lead to a 1.5% decline in global merchandise trade in 2025,” the report says.
The World Trade Organization reminded that the tariff confrontation took place after a successful year for world trade in 2024, during which trade in goods grew by 2.9% and trade in commercial services by 6.8%.
Consequences of the trade standoff for the US and China
The mutual imposition of tariffs by China and the United States is likely to lead to a “sharp decline” in trade between them and a redirection of flows, says Ralph Ossa, chief economist at the WTO.
“Chinese exports are projected to grow by 4-9% in 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 to fill the gap and could open the door for some least developed countries to increase their presence in the U.S. market,” the WTO report said.
The regional aspect of the trade war
The World Trade Organization also pointed out that the impact of recent changes in trade policy is likely to vary sharply from region to region.
The duties are expected to have the most negative impact on North America, whose forecast was lowered by 1.6 percentage points. North America is followed by Asia (-0.4 percentage points) and South and Central America and the Caribbean (-0.2 percentage points).
Meanwhile, Asia and Europe continue to make a positive contribution to world trade, but less than in the baseline scenario, with Asia’s contribution halved to 0.6 percentage points.
As a reminder, the Director-General of the World Trade Organization, Dr. Ngozi Okonjo-Iweala, has previously stated that the division of the global economy into two blocs could lead to a long-term decline in global real GDP by almost 7%. Preliminary WTO forecasts show that trade in goods between the world’s two largest economies could drop by 80%.
According to Ngozi Okonjo-Iweala, the tit-for-tat approach between these two economies, whose bilateral trade accounts for approximately 3% of world trade, has broader implications that could seriously damage the global economic outlook.
