Geneva (AFP) – Global trade is expected to plummet this year in the wake of President Donald Trump’s tariff offensive, fuelling uncertainty that threatens “severe negative consequences” for the world, the World Trade Organization warned Wednesday. Since returning to office, Trump has imposed a 10 percent tariff on imports of goods from around the world along with 25 percent levies on steel, aluminium and cars. While Trump made a U-turn on steeper tariffs for dozens of countries, he has escalated a trade war with China, slapping 145 percent levies on Chinese goods while Beijing retaliated with a 125 percent duty on US products.
“I am deeply concerned by the uncertainty surrounding trade policy, including the US-China stand-off,” WTO chief Ngozi Okonjo-Iweala said in a statement. “The recent de-escalation of tariff tensions has temporarily relieved some of the pressure on global trade,” she said. “However, the enduring uncertainty threatens to act as a brake on global growth, with severe negative consequences for the world, the most vulnerable economies in particular.”
At the start of the year, the WTO expected to see global trade expand in 2025 and 2026, with merchandise trade seen growing in line with global GDP, and trade in services growing even faster. But in the organisation’s annual global trade outlook published Wednesday, it determined that as things stand, world merchandise trade is on course to fall 0.2 percent this year. The number, calculated in line with the tariff situation on April 14, is already nearly three percentage points lower than what would have been expected without the tariffs Trump has slapped on countries around the globe.
The WTO warned that “severe downside risks” could see trade “shrink even further, to 1.5 percent in 2025, if the situation deteriorates”. The WTO also cautioned that services trade, while not directly subject to tariffs, was also “expected to be adversely affected”. The global volume of commercial services trade was now forecast to grow by 4.0 percent — around a percentage point less than expected.
This year, the impact of the tariffs was expected to be felt quite differently in different regions, the WTO said. “Under the current policy landscape, North America is expected to see a 12.6-percent decline in exports and 9.6-percent drop in imports in 2025,” the organisation said. “The region’s performance would subtract 1.7 percentage points from world merchandise trade growth in 2025, turning the overall figure negative,” it pointed out.
Asia, meanwhile, was projected to post “modest growth”, with both exports and imports set to swell by 1.6 percent. European exports were on track to grow by one percent, and imports by 1.9 percent.
Okonjo-Iweala told reporters she was especially concerned about the “sharp projected decline in US-China bilateral trade”, currently expected to fall by 81 percent. “This level of a drop in US-China trade of the magnitudes we are talking about, this virtually can amount to a decoupling of the two economies,” she said.
While US-China trade accounts for just around three percent of world merchandise trade, Okonjo-Iweala cautioned that their decoupling “could have far-reaching consequences”. She voiced concern that it could “contribute to a broader fragmentation of the global economy along geopolitical lines into two isolated blocks”. In that scenario, “our estimates suggest that global GDP would be lowered by nearly seven percent in the long term,” she said. “This is quite significant and substantial.”
© 2024 AFP
