By Sharon Atieno
The increased taxes imposed on goods imported across different countries (tariffs) are expected to reduce trade in goods globally, according to a recent report.
According to the Global Trade Outlook and Statistics report, under current conditions, the volume of world merchandise trade is expected to decline by 0.2% in 2025. This is based on the tariff situation as of 14th April.
However, this could decline further to 1.5 % if the situation worsens, including the application of the “reciprocal” tariff the United States fronted on its trade partners and the broader spillover of policy uncertainty.
This forecast differs from 2024, when the volume of merchandise trade grew by 2.9% while GDP expanded by 2.8%.
“I am deeply concerned by the uncertainty surrounding trade policy, including the US-China stand-off. The recent de-escalation of tariff tensions has temporarily relieved some of the pressure on global trade. 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,” World Trade Organization (WTO)’s Director-General Ngozi Okonjo-Iweala said.
Recently, the United Nations Trade and Development (UNCTAD) called for the exemption of vulnerable countries from new tariff hikes. The agency said that they are already grappling with low growth and mounting uncertainty, and their activities have a negligible effect on trade deficits.
According to UNCTAD, 28 of the countries to be affected by the US’ reciprocal tariff contribute less than 0.1% of the total US trade deficit. Any trade concessions they grant would mean little to the United States, while potentially reducing their own revenue collection.
Some of these countries include Namibia, Cameroon, Zambia, Democratic Republic of Congo, Mozambique, Equatorial Guinea, Chad, Malawi and Zimbabwe, among others.
If actualized, the report shows that reciprocal tariffs would reduce global merchandise trade volume growth by 0.6 percentage points in 2025, while spreading trade policy uncertainty could shave off another 0.8 percentage points.
“Our simulations show that trade policy uncertainty has a significant dampening effect on trade flows, reducing exports and weakening economic activity,” WTO Chief Economist Ralph Ossa said. “Moreover, tariffs are a policy lever with wide-ranging and often unintended consequences. In a world of growing trade tensions, a clear-eyed view of those trade-offs is more important than ever.”
The WTO report shows that the decline in merchandise trade is likely to affect North America more, with a 12.6% drop in exports and a 9.6% decrease in imports in 2025. Asia is projected to post modest growth in both exports and imports this year (1.6% for both), along with Europe (1.0% export growth, 1.9% import growth).
The combined contribution of other regions – Africa, the Commonwealth of Independent States (CIS), including certain associate and former member states, the Middle East, and South and Central America and the Caribbean – also declines but remains positive. This is probably due to these regions’ relative importance as producers of energy products, demand for which remains constant.
This comes at a time when the global economic growth is expected to slow to 2.3% in 2025. “Trade policy uncertainty is at a historical high,” a recent UNCTAD report notes, “and this is already translating into delayed investment decisions and reduced hiring.”
UNCTAD urges dialogue and negotiation, alongside stronger regional and global policy coordination, building on existing trade and economic ties to keep development on track.
The WTO Director General calls on its 166 members to inject dynamism into the organization, foster a level-playing field, streamline decision-making, and adapt WTO’s agreements to better meet today’s global realities.
