The volume of services trade is projected to grow by 4 per cent in 2025, around 1 percentage point less than expected
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DENIS BALIBOUSE
US President Donald Trump’s tariff manoeuvres have “deteriorated” global trade outlook significantly in 2025 and is expected to shrink world trade volumes by an estimated 0.2 per cent in 2025 even if the pause in reciprocal tariffs continues, according to the WTO Secretariat’s latest global trade outlook and statistics report.
However, if the suspended reciprocal tariffs are reactivated after the 90-day pause, the resulting trade policy uncertainty would lead to a 1.5 per cent decline in world merchandise trade in 2025, the WTO report released on Wednesday cautioned.
Trade risks
“Risks to the merchandise trade forecast persist, particularly from the reactivation of the suspended “reciprocal tariffs” by the United States, as well as the spread of trade policy uncertainty that could impact non-US trade relationships. If realised, 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,” the report stated, adding that there may be a modest recovery of 2.5 per cent in 2026
The volume of services trade is projected to grow by 4 per cent in 2025, around 1 percentage point less than expected.
For Indian exporters, the WTO projections are particularly worrisome because even in the best case scenario, imports by North America are predicted to drop by 9.6 per cent.
As the US remained India’s top export destination in FY25, accounting for over 19 per cent of the country’s total exports, reduced imports would hurt Indian prospects.
Export shift
Another area of concern for India is the “significant trade diversion” that the disruption in US-China trade is expected to trigger, with Chinese exports projected to rise by
4- 9 per cent outside North America. India has already put in place an import monitoring mechanism to keep a close tab on inflows not only from Beijing but also from Vietnam and Indonesia.
The US-China tariff war could be a mixed bag as US imports from China are expected to fall sharply in sectors such as textiles, apparel, and electrical equipment, creating new export opportunities for other suppliers.
Trump announced country-specific reciprocal tariffs, mostly ranging between a baseline 10 per cent and 50 per cent, on April 2 and then suspended them for 90-days to give time for trade deals.
The recent tariff disturbances follow a strong year for world trade in 2024 where merchandise trade grew 2.9 per cent and commercial services trade rose 6.8 per cent, the report noted.
“Baseline projections suggest that merchandise trade growth could have been as high as 2.7 per cent in 2025 and 2.9 per cent in 2026 had tariffs and uncertainty remained low. Meanwhile, services trade growth could have reached 5.1 per cent this year and 4.8 per cent next year,” the report said.
Published on April 16, 2025
