Introduction

  • The Global Trade Outlook and Statistics 2025 report has been issued by the World Trade Organization (WTO).
  • The report projects a global merchandise trade decline of 0.2% for the year 2025.
  • This decline is attributed to tariff tensions, particularly between the US and China and broader trade policy uncertainty.

 

Trade Projections and Influences

  • The WTO's forecast for global merchandise trade shows a 0.2% decline in 2025 which could potentially deepen to 1.5% if trade tensions escalate further.
  • Reactivation of US reciprocal tariffs could cut global trade growth by 0.6% points, while ongoing US-China tariff escalation in 2025 may reduce trade by an additional 0.8% points.
  • Notwithstanding, the global services trade is expected to grow by 4.0% in 2025, albeit slower due to tariff-induced disruptions.

 

Regional Impact and Vulnerable Economies

  • North America is anticipated to experience a 12.6% decline in exports, significantly impacting global trade.
  • On the contrary, Asia and Europe are estimated to see modest trade growth, with Asia’s exports growing by 1.6%, and Europe’s exports by 1.0%.
  • Least-developed countries (LDCs), with their heavy reliance on a narrow range of exports, are especially vulnerable to the downturn in global trade.

 

Trade Diversions and Economic Recession Risks

  • The US-China trade disruption could significantly drive trade diversion, with Chinese exports projected to increase by 4%-9% in regions excluding North America.
  • Conversely, US imports from China might decrease, paving the way for other suppliers, including LDCs, to fill the gap.
  • The United Nations Conference on Trade and Development (UNCTAD) forewarns a potential shift towards economic recession, with the global growth rate possibly dipping to 2.3% in 2025.

 

India’s Trade Position

  • India’s rank among leading merchandise exporters dropped to 14th in 2024, while its share of global merchandise trade remained stable at 2.2%.
  • Similarly, India’s rank among major merchandise importers fell to 7th but its share remained unchanged at 3.4%.
  • India’s rank as a commercial services exporter decreased to 6th, with a slight drop in share from 5.4% to 5.3%.

 

World Trade Organization

  • The WTO, established in 1995, serves as an international institution to regulate global trade.
  • It was formed under the Marrakesh Agreement of 1994 and succeeded the General Agreement on Tariffs and Trade (GATT).
  • The WTO has broadened its scope to incorporate not only goods but also services and intellectual property.
  • The WTO's head office resides in Geneva, Switzerland, and the organisation encompasses 166 member states, which account for 98% of global trade.
  • Key WTO agreements promote trade liberalisation and conflict resolution over intellectual property rights.