The World Trade Organization (WTO) has recently delivered a dire message. They expect that the tariffs recently announced by the United States will lead to a noticeable deceleration in global trade and economic growth. The U.S. government has enacted a 10% tariff on all imports, alongside a staggering 145% tariff on imports specifically from China. The subsequent dramatic increase in trade barriers has raised fears that this represents a first step toward a complete “decoupling” of the U.S. and Chinese economies. This decoupling would be swift and stunningly disruptive to global trade.
The tariffs on specific sectors, particularly cars and steel, are expected to contribute to a decline in global goods trade. The WTO forecasts a 0.2% drop in global goods trade directly because of these tariffs. In the most pessimistic, doomsday scenario where these tariffs are indeed reimposed, the global goods trade could fall by 0.8%. The WTO projects goods trade to grow by just 2.7% this year. The imposition of tariffs threatens to upend this growth.
WTO Director-General Ngozi Okonjo-Iweala recently expressed alarm over the fallout of U.S.-China decoupling. She argues that this divide threatens to undermine the kind of teamwork across public and private sectors that is needed for economic prosperity. “The decoupling of these two major economies could lead to increased trade tensions and uncertainty,” she stated. As negotiators gather for the WTO’s 12th Ministerial Conference, the WTO is starting a fact-finding investigation into the long-term effects of these U.S. tariffs on China’s economy. China has pushed the org to reconsider these impacts too.
In an unprecedented change, the WTO has brought forward its forecasts for world GDP growth in 2025. Rather than the previously predicted 2.8%, it now expects a significantly lower 2.2% growth rate. This change is a testament to the increasing concern about the direction of U.S. relationships with foreign trade partners and overall economic policy. The business organization cautions that continuing indecision on trade policy could trigger a deeper global economic growth slowdown.
In the wake of these forecasts, the WTO is possibly more hopeful about some underlying trends in the trade landscape. 2024 to 2025 growth rate Chinese exports to all but North America are projected to increase between 4% and 9% in 2025. This growth illustrates the latent demand for opportunity in markets beyond just the most desirable—though challenges still remain here.