Global trade could shrink by 1% in 2025 due to reciprocal tariffs of 10%-50% imposed by the US on products imported from many of its trading partners, the World Trade Organization (WTO) has projected.
In a statement released Thursday, WTO Director-General Ngozi Okonjo-Iweala expressed concerns that these tariffs, along with other trade restrictions introduced earlier this year, could lead to a significant slowdown in global merchandise trade.
“While the situation is rapidly evolving, our initial estimates suggest that these measures, coupled with those introduced since the beginning of the year, could lead to an overall contraction of around 1% in global merchandise trade volumes this year, representing a downward revision of nearly four percentage points from previous projections,” she said.
Okonjo-Iweala shared particular apprehension over the risk of escalating retaliatory measures, which could worsen the decline in trade, saying she was “deeply concerned” about the decline and the potential for escalation into a full-scale tariff war.
Although the tariffs pose risks, the WTO leader noted that the majority of global trade—about 74%—still flows under the WTO’s Most-Favored-Nation terms, although this share has fallen from 80% earlier in the year.
Okonjo-Iweala urged WTO members to manage trade tensions carefully and emphasized the organization’s role in preventing conflicts from escalating, ensuring a stable and open global trade environment.