Global trade is facing headwinds from a surge in tariffs and rising trade policy uncertainty. The volume of world merchandise trade is projected to decline by 0.2 per cent in 2025 — almost three percentage points lower than it would have been without the recent policy shifts. A modest recovery of 2.5 per cent is expected in 2026.
“This marks a notable reversal from forecasts earlier this year, when WTO economists anticipated continued trade expansion, supported by improving macroeconomic conditions,” the World Trade Organisation said in a report, a copy of which was obtained by The Egyptian Gazette.
There are also important downside risks that could lead to a steeper decline in world trade. These include the possible implementation of the currently suspended “reciprocal tariffs” by the United States, as well as the potential for a broader spillover of trade policy uncertainty to other trading relationships.
If enacted, reciprocal tariffs would reduce global merchandise trade growth by an additional 0.6 percentage points. A wider spread of trade policy uncertainty could cut growth by a further 0.8 percentage points. Taken together, these risks would lead to a 1.5 per cent decline in world merchandise trade volume in 2025.
“The impact of recent trade policy changes varies sharply across regions.According to our current forecast, North America now subtracts 1.7 percentage points from global merchandise trade growth in 2025, turning the overall figure negative,” it said.
Asia and Europe continue to contribute positively but less than in the baseline “low tariff” scenario, with Asia’s contribution halved to 0.6 percentage points. Meanwhile, the combined contribution of other regions — Africa, the Commonwealth of Independent States (CIS), the Middle East, and South and Central America and the Caribbean — also declines somewhat but remains positive. An important driving force behind these changes is the decoupling between China and the United States, resulting from tariffs that now well exceed 100 per cent.
The disruption in United States–China trade is also expected to trigger significant trade diversion, raising concerns among other markets about increased competition from China. As trade is redirected, Chinese merchandise exports are projected to rise by between 4 and 9 per cent across all regions outside North America. At the same time, US 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. This could open the door for some least-developed countries to increase their exports to the US market.
As a result, the volume of global services trade is now forecast to grow by 4.0 per cent in 2025 and 4.1 per cent in 2026 — well below the baseline projections of 5.1 per cent and 4.8 per cent.
