The World Trade Organization (WTO) has issued a stark warning that Donald Trump’s tariffs are set to cause a reversal in international trade growth this year, leading to a decline of 0.2%. This marks a significant departure from the initial forecast of a 2.7% expansion in goods trade. The WTO expressed particular concern over the escalating trade tensions between the US and China, with trade between the two countries expected to plummet by 81% – 91%.

The imposition of tariffs by the US, including a 10% tariff on all imports and much higher rates for China, is expected to have a major impact on global trade. The WTO predicts a sharp decline in trade with the US, while other regions may still experience growth. Trump’s reciprocal tariffs, which were recently paused for 90 days, could lead to a further 0.8% decline in global goods trade if reinstated.

The uncertainty surrounding trade policies and potential disruptions in global trade could have far-reaching consequences, with the WTO warning of a worst-case scenario involving a 1.6% fall in trade and weaker global GDP growth of just 1.5%. The organization also highlighted the importance of managing uncertainty to sustain positive macroeconomic momentum and global trade growth in the coming years.

Despite the challenges posed by Trump’s tariffs, the WTO predicts that China may seek new markets outside the US, leading to an expansion of Chinese exports to regions beyond North America. While services trade is not directly impacted by the tariffs, the WTO anticipates indirect effects on related services due to weakened demand and increased uncertainty.

The WTO’s role as the guardian of global trading rules has faced scrutiny amid the slowdown in globalization. China has called on the WTO to investigate the impact of Trump’s tariffs, emphasizing that reciprocal tariffs are not a sustainable solution to trade imbalances and could ultimately harm the US itself.