Summary
- The World Trade Organization (WTO) forecasts that the global merchandise trade growth rate will record a negative figure this year due to the tariff policies of the Trump administration.
- As a result, the scale of global merchandise trade could see the largest decline since the COVID-19 crisis.
- Ngozi Okonjo-Iweala, Director-General of the WTO, warned that decoupling between the U.S. and China could lead to geopolitical fragmentation of the global economy.
WTO Slashes '3% Growth' Forecast
Largest Decline Since COVID-19 Crisis
The World Trade Organization (WTO) has projected that the global merchandise trade growth rate will record a negative figure this year due to the tariff shock from the Donald Trump administration in the United States. It also forecasted that if President Trump imposes the deferred reciprocal tariffs, the scale of global merchandise trade could see the largest decline since the COVID-19 crisis.
In its 'World Trade Outlook and Statistics' report released on the 16th (local time), the WTO revised its forecast for this year's global merchandise trade growth rate to decrease by 0.2% compared to the previous year. This is a significant reduction from the 3.0% growth forecast presented last October.
The WTO projected that if the U.S. does not proceed with an additional deferral after the 90-day reciprocal tariff imposition deferral, the decline could be even greater. The WTO stated, "If reciprocal tariffs are fully reintroduced, the global merchandise trade growth rate could fall by an additional 0.6 percentage points, and the ripple effect could lead to a further decrease of 0.8 percentage points." In this case, the global merchandise trade growth rate is expected to drop to -1.5%, marking the largest decline in trade since 2020, which was impacted by COVID-19.
The WTO emphasized, "The recent changes in trade policy are unprecedented, so this forecast should be interpreted with more caution." Ngozi Okonjo-Iweala, Director-General of the WTO, warned at a press conference held at the WTO headquarters in Geneva, Switzerland, "Decoupling between the U.S. and China could lead to geopolitical fragmentation of the global economy, resulting in the world being divided into two blocs," and "In such a scenario, the global Gross Domestic Product (GDP) could shrink by 7% in the long term."
The WTO also anticipated in the report that this tariff war would trigger significant trade diversion. China is expected to see a 4-9% increase in merchandise exports in all regions except North America.
Reporter Kim Dong-hyun 3code@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
