By zainab.joaque@awokonewspapersl.com
Freetown, Sierra Leone – The World Trade Organization (WTO) has issued a stark warning about the health of global trade, slashing its 2025 outlook in the face of escalating protectionism, stalled negotiations, and mounting policy uncertainty.
In its newly released Global Trade Outlook and Statistics report, the WTO now projects that world merchandise trade will shrink by 0.2% in 2025—a dramatic reversal from the 3% growth forecast just months ago. The downgrade represents a nearly three-percentage-point swing compared to scenarios with minimal trade barriers.
“The recent de-escalation in tariff tensions has bought the global economy some time,” said WTO Director-General Ngozi Okonjo-Iweala, “but persistent uncertainty is acting as a brake on global growth—especially for the most vulnerable economies.”
Much of the WTO’s current forecast hinges on the temporary suspension of certain U.S. reciprocal tariffs—excluding those against China. But that pause may be short-lived. If tariffs are reimposed or global trade tensions flare again, the WTO estimates that world merchandise trade could contract by as much as 1.5%, the deepest plunge since the COVID-19 pandemic.
WTO Chief Economist Ralph Ossa emphasized the downside risks:
“Our simulations suggest trade policy uncertainty alone can significantly dampen trade flows, curbing exports and weakening broader economic activity.”
The report points to North America as the region most at risk. U.S. exports are forecast to fall by 12.6%, while imports could drop 9.6%. This regional downturn is expected to strip 1.7 percentage points from global trade growth, effectively dragging the entire global figure into negative territory.
Asia and Europe are projected to see modest growth in trade flows, but those gains will pale in comparison to losses in North America and fail to lift the overall outlook.
In a first, the WTO included a forecast for global services trade—which, though not directly subject to tariffs, is increasingly vulnerable to the broader slowdown. Global services trade is expected to grow by 4.0% in 2025, down from earlier projections of 5%. Key sectors like transport and information technology services are likely to feel the impact most acutely.
Despite a slight easing of tensions, the U.S.–China trade war continues to cast a long shadow. WTO estimates suggest that merchandise trade between the two giants could fall by a staggering 81% in 2025, barring further policy adjustments. This economic decoupling is likely to divert trade flows, with China poised to increase exports to non-U.S. markets by up to 9%, and U.S. imports from China—particularly in textiles and electronics—set to decline sharply.
This shift could create openings for alternative suppliers, including emerging markets and least-developed countries eager to fill the gap.
The WTO is urging its member states to seize this moment of disruption as an opportunity for reform.
“WTO members have a unique opportunity to reinvigorate the global trading system,” Okonjo-Iweala said. “We need to modernize rules, promote a level playing field, and adapt multilateral frameworks to reflect today’s economic realities.”
While a temporary tariff ceasefire has helped avert a more immediate collapse, the underlying fragility of the global trading system remains unresolved. For investors, corporates, and governments, the message is clear: without bold action to reduce uncertainty and reinforce multilateral cooperation, the world may be headed for a deeper and more damaging trade contraction.
The coming year could prove pivotal. Whether the global economy stabilizes—or slips further into fragmentation—will depend not just on interest rates or inflation, but on trust, transparency, and trade policy clarity. ZIJ/19/5/2025
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