**Global:** The WTO forecasts a 0.2% drop in global merchandise trade volume in 2024 due to increased tariffs and trade policy uncertainty, potentially reducing world GDP growth to 2.2% in 2025 and disrupting regional trade patterns, especially in North America and Asia.
The World Trade Organization (WTO) has identified emerging challenges to global trade growth in 2024, following a period of robust performance earlier in the year. According to a recent blog post authored by economist Ralph Ossa, the global merchandise trade volume is anticipated to contract by 0.2 per cent in 2024, marking a decline of nearly three percentage points compared to projections made before recent policy developments.
The slowdown is attributed primarily to a marked increase in tariffs and heightened uncertainty surrounding trade policies worldwide. This shift is expected to exert downward pressure on global economic activity, with the WTO forecasting world gross domestic product (GDP) growth to reach only 2.2 per cent in 2025, which is 0.6 percentage points below baseline estimates. A modest recovery to 2.4 per cent GDP growth is projected for 2026.
Further risks could exacerbate these negative trends. Should reciprocal tariffs—where countries impose matching tariffs in response to each other’s trade barriers—be implemented, global merchandise trade growth could experience an additional decrease of 0.6 percentage points. More broadly, an expansion of trade policy uncertainty across multiple economies might cut trade growth by a further 0.8 percentage points. Combined, these factors could lead to an overall decline of 1.5 per cent in global merchandise trade volume for the year.
The implications of these shifts are expected to vary by region. North America is forecast to sustain the most pronounced impact, with growth expected to slow by 1.6 percentage points. Asia would also see a contraction, with a 0.4 percentage-point slowdown in growth, while South and Central America and the Caribbean could experience a 0.2 percentage-point reduction.
The WTO blog also highlights significant trade diversion caused by disruptions in US-China trade relations. As bilateral trade in certain sectors such as textiles and apparel declines, Chinese exports to regions outside North America are projected to increase by 4 to 9 per cent. This redirection of trade flows may create opportunities for other exporters, including some least-developed countries, to expand their access to the US market by filling gaps left by reduced Chinese imports.
While the direct effect of reciprocal tariffs on global GDP might be limited, the broader spread of trade policy uncertainty could nearly double the anticipated economic losses, bringing the GDP reduction to 1.3 percentage points below the baseline scenario.
These developments underscore the complex interplay between trade policies, market dynamics, and economic growth projections globally, as countries navigate an evolving international trade environment.
Source: Noah Wire Services
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