Rising trade tensions and policy uncertainty are casting a shadow over the global economy, according to recent reports from leading international organizations.
The World Trade Organization (WTO) projects that the volume of global merchandise trade is expected to decline by 0.2 percent in 2025 under current tariff conditions. This is nearly 3 percentage points lower than previous forecasts based on a low-tariff scenario, as revealed in their latest Global Trade Outlook and Statistics report published on Wednesday.
A Brake on Global Growth
The WTO warned of severe downside risks posed by the reinstatement of certain reciprocal tariffs and the spillover of trade policy uncertainty. These factors could lead to an even sharper decline of 1.5 percent in global goods trade in 2025.
The impact varies across regions. North America could see a particularly steep decline, with exports forecast to drop by 12.6 percent. In contrast, Asia is expected to experience modest trade growth, with exports and imports both projected to grow by 1.6 percent. Europe may register a 1.0 percent increase in exports and a 1.9 percent rise in imports.
WTO Director-General Ngozi Okonjo-Iweala emphasized that trade policy uncertainty threatens to act as a brake on global growth, with severe negative consequences for the world, particularly the most vulnerable economies. Speaking at a press conference, she stressed that the reinstatement of reciprocal tariffs could carry severe consequences and urged that the least developed countries be exempted from such measures.
Investment Decisions Delayed
The United Nations Conference on Trade and Development (UNCTAD) echoed these concerns in a report released on Wednesday. It stated that the world economy is on a recessionary trajectory, with global growth expected to slow to 2.3 percent in 2025 due to rising trade tensions and historically high policy uncertainty.
According to UNCTAD’s Trade and Development Foresights 2025 report, rising trade tensions are impacting global trade, leading to delayed investment decisions and reduced hiring. The organization expressed concern over the impact of the economic slowdown on developing countries, especially the most vulnerable economies.
However, UNCTAD highlighted the growth of South-South trade, which accounts for about one-third of global trade, as a source of resilience and a buffer against uncertainty. The development of China has been promoting steady growth in South-South trade, offering opportunities for many developing countries.
As trade tensions continue to rise, the global community watches closely to see how these challenges will shape the future of international trade and economic growth.
