WTO's Warning: "Global Trade Growth Rate to Record Negative This Year"

The World Trade Organization (WTO) has forecast that the global goods trade growth rate will record a negative figure this year due to the shock of the 'tariff bomb' imposed by the Donald Trump administration in the United States. In particular, it warned that if President Donald Trump resumes the mutual tariff imposition that was postponed for 90 days, the ripple effect could cause the global goods trade volume to shrink to its lowest level since the COVID-19 pandemic.

On the 16th (local time), the WTO announced in its World Trade Outlook and Statistics report that the global goods trade growth rate will decline by 0.2% this year, resulting in negative growth. This figure reflects tariff policies up to the 14th and represents a significant setback compared to the forecast of a 3.0% increase presented in October last year.

원본보기 아이콘

President Trump recently imposed 25% tariffs on items such as steel, aluminum, and automobiles, and announced country-specific mutual tariffs on trading partners including South Korea. Although the mutual tariffs were postponed for 90 days, the tariff rate on China soared to 145% amid ongoing retaliatory tariff disputes.

In particular, the WTO stated, "If President Trump fully reinstates the currently suspended mutual tariffs, the global goods trade growth rate could fall by an additional 0.6 percentage points, and the spread of trade policy uncertainty could cause a further 0.8 percentage point decline." It added, "Combined, these effects could result in a total decline of 1.5 percentage points." This would represent the largest drop in trade since the severe impact of COVID-19 in 2020. The WTO also noted, "Because recent trade policy changes are unprecedented, this forecast should be interpreted with greater caution than usual."

Ralph Ossa, WTO Chief Economist, said, "The WTO's main forecast only reflects uncertainty in U.S. trade relations. What if that uncertainty spreads globally?" For example, if Chinese companies learn that tariffs have increased product prices in the U.S., weakening demand, they may seek customers in other countries. However, this could lead trading partners such as the European Union (EU) to impose measures restricting the inflow of Chinese goods, opening a new chapter in trade conflicts.

The WTO estimated that China's exports to markets outside the U.S. will increase by 4-9% this year. However, the impact on some key industries could be greater, potentially leading to job losses and raising concerns about intensified competition with China in third markets. It particularly expressed concern about the severe impact on export-oriented least developed countries (LDCs), where trade is concentrated in a few items such as textiles.

Additionally, the WTO lowered its growth forecast for global commercial services trade from 5.1% to 4% for this year, and from 4.8% to 4.1% for next year. Although trade conflicts have not yet spread to services trade, if they do, this slowdown is expected to worsen. Increased uncertainty could also reduce spending on travel and investment-related services. Economist Ossa warned, "Trade tensions could expand beyond goods trade to services trade."

However, the WTO slightly lowered its 2026 goods trade growth forecast from 2.9% to 2.5%, expecting a gradual recovery in global trade next year.

On the same day, Ngozi Okonjo-Iweala, WTO Director-General, stated at a press conference held at the WTO headquarters in Geneva, Switzerland, that the decoupling of the world's first and second largest economies, the U.S. and China, is the greatest concern.

She said, "We are deeply concerned about uncertainties surrounding trade policies, including U.S.-China conflicts," adding, "Decoupling between the U.S. and China could lead to geopolitical fragmentation of the global economy, resulting in a world divided into two polarized blocs." She continued, "In such a scenario, global gross domestic product (GDP) could shrink by 7% in the long term, which would have a significantly serious impact."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.