Global trade growth anticipated by the WTO drops to 0.5% next year
The World Trade Organization has significantly revised its 2026 forecast for global merchandise trade volume growth, now projecting an increase of just 0.5 per cent. This adjustment comes in light of anticipated delayed effects stemming from US President Donald Trump’s tariffs. It signifies a notable adjustment from the earlier projection in August of 1.8 percent growth. “The outlook for next year is bleaker … I am very concerned,” Director-General Ngozi Okonjo-Iweala said. However, she stated that the world trading system is demonstrating resilience, with the rules-based multilateral system offering a degree of stability amid trade turmoil. India and the US are engaged in discussions regarding a trade deal, focusing on an interim trade agreement that includes tariff concessions. The US has proposed reciprocal tariffs, which could impact India-US bilateral trade. The Modi-Trump trade pact is being compared to the Vietnam-US trade deal as India navigates its trade negotiations.
With a looming tariff deadline, the future of the India-US bilateral trade agreement remains uncertain. India has put forth a proposal for retaliatory duties in response to the United States’ auto tariffs at the World Trade Organization. For 2025, the WTO has revised its forecast for global trade volume growth to 2.4 per cent, an increase from the previous estimate of 0.9 per cent. This adjustment is largely attributed to the front-loading of imports into the United States in anticipation of tariff hikes, as well as an uptick in the trade of AI-related goods. It remains beneath the 2.8 percent growth observed in 2024. Since taking office in January, Trump’s tariff decisions have stunned financial markets and created a ripple of uncertainty throughout the global economy. On August 7, Trump imposed higher tariffs on imports from dozens of countries, leaving major trade partners like Switzerland, Brazil, and India scrambling for a better deal. Meanwhile, the EU reached an agreement that established duties at 15 percent on most EU goods imported into the United States.
Overall world merchandise trade volume growth is projected to decelerate from 2.8 percent last year to 2.4 percent this year and further to 0.5 percent next year. The WTO projects that global GDP growth will experience a slight decline, moving from 2.7 percent in 2025 to 2.6 percent in 2026. “Tariff measures are weighing on trade, even though front-loading and the suspension of many duty hikes between April and August have pushed their effects back into the latter part of this year, and especially into next year,” Okonjo-Iweala stated. In the first half of 2025, world merchandise trade volume, measured by the average of exports and imports, increased by 4.9 percent year-on-year, with trade value rising 6 percent compared to 2 percent growth in 2024, according to the WTO report. As a result, WTO economists have revised their trade growth forecast for this year to 2.4 per cent, an increase from April’s prediction of a 0.2 per cent decline.
The report found that the rush of exporters to send goods, including machinery, motor vehicles, and lumber, to the US before the tariff increases, along with a surge in demand for AI-related products, contributed to this growth. Trade in AI-linked goods, including semiconductors and telecommunications equipment, represented almost half of the total trade growth, increasing by 20 percent compared to the previous year. The report highlighted that Asia’s export performance was particularly strong. Asia and Africa are anticipated to experience the most rapid growth in export volumes this year, whereas Europe’s export growth is projected to decelerate and North America’s is expected to decrease. All regions are expected to see a decline in import performance in 2026.
