The World Trade Organization (WTO) has issued a stark warning that global trade is set to decline this year due to tariffs imposed by US President Donald Trump. The organization has flagged "severe downside risks," emphasizing that reciprocal tariffs and ongoing political instability could exacerbate this downturn, particularly in North America, where trade is expected to decline by over 10%.

WTO Director-General Ngozi Ikonjo-Iweala expressed concern about the growing "decoupling" of the US and China, describing it as "a phenomenon that is really worrying." The WTO initially anticipated a 2.7% growth in global goods trade for 2025 but has now adjusted its forecast to a decline of 0.2%. Chief economist Ralph Ossa remarked that while tariffs are used as a policy tool, they often have unintended consequences that can significantly hinder trade flow and economic activity.

Since the implementation of a baseline tariff of 10% on nearly all foreign imports to the US on April 5, uncertainty has gripped markets, evidenced by the decline of major US stock indexes. Notably, China's tariffs have surged to a staggering 145% on numerous goods.

Despite the grim outlook for US trade, the WTO suggests that regions such as Asia and Europe might still experience modest growth in both exports and imports this year, indicating that the overall contribution of other regions to world trade could remain positive.

In a new development, the WTO has introduced a forecast for services trade which is expected to grow by 4% by 2025, slightly less than previously estimated. This reflects a shift toward service-oriented sectors, like tourism and finance, where trade occurs without the movement of physical goods.

The period since Trump's inauguration has been marked by numerous tariff-related announcements. While the US president claims these tariffs will boost local consumption and investment, critics argue that reviving American manufacturing is an intricate challenge that may take years, affecting the economy in the meantime.

Importantly, Trump has altered some trade announcements, notably pausing certain tariffs impacting various countries, except China, amid significant opposition from both political and business leaders. The ongoing negotiations and adjustments emphasize the complex relationship between US tariffs and global trade dynamics.