Introduction to the World Trade Organization (WTO)
The World Trade Organization (WTO) is an international organization that deals with the global rules of trade between nations. Established in 1995, it is responsible for promoting free trade by reducing barriers and providing a platform for resolving disputes among member countries.
Revised Tariff Impact Projections
The WTO recently released updated projections indicating that the impact of rising tariffs on global trade will peak in 2026, contrary to earlier expectations that it would occur in 2025.
North American Trade Forecast
For North America, the WTO projects that imports of goods will decrease by 4.9% in 2025 and further drop to 5.8% in 2026. In April, these projections were -9.6% and -0.8%, respectively.
- Export decline in North America is expected to be 3.1% and 1.0% in 2025 and 2026, respectively, showing a lesser impact compared to the -12.6% and -1.2% projected in April.
- The WTO reported that the volume of global merchandise trade, measured by the average of exports and imports, increased significantly year-over-year by 5.5% in the first quarter of 2025, followed by a smaller increase of 4.3% in the second quarter.
- This strong performance in the first half of 2025 led to an upward adjustment of WTO economists’ trade growth projections, adjusted for tariffs, to 2.4% for 2025, well above the -0.2% projection in April’s Perspectives and Trade Statistics report.
- However, the adjusted projection for 2026 is considerably weaker at 0.5%, compared to the previous 2.5% forecast in April.
According to the WTO, “As a result, the cumulative impact for 2025-26 is only slightly stronger in the current forecast (+2.9%) than in the previous one (+2.3%), suggesting that the overall impact of higher tariffs may have been delayed until next year.”
Regional Trade Contributions
Despite a robust first half of 2025, North American trade flows are expected to negatively contribute to the global merchandise trade growth for both 2025 and 2026. Asia is projected to make the largest positive contribution to trade growth this year, though it will decrease in the following year. Europe and the rest of the world are expected to make modest positive contributions to trade expansion in both years.
First Half of 2025 Export Growth
The interannual growth in the volume of merchandise exports for the first half of 2025 was positive across most WTO regions, with Asia leading the growth at 10.4%. North America experienced slower growth at 3.0%, including a 2.2% increase in the first quarter. Europe remained relatively flat with a decrease of 0.3% in growth.
- Moderate growth was observed in South America and the Caribbean (7.4%) and Africa (6.3%) in their merchandise exports.
- Middle East registered a growth of 3.7%, while the Commonwealth of Independent States (CIS), including some associated and former member states, experienced a notable decrease of 1.5% in merchandise exports.
First Half of 2025 Import Growth
All regions experienced positive interannual growth in the volume of imports during the first half of 2025. South America (14.7%) and Africa (13.7%) led the growth, followed by North America (9.4%), despite a significant 13.9% decrease in import volume for the latter between the first and second quarters.
- Asia (5.8%) and the Middle East (5.1%) had more moderate growth in import volumes during the first half of 2025.
- Europe (2.4%) and the CIS (2.2%) reported the slowest growth in import volumes.
- Intertrimestral growth was generally weaker in the second quarter of 2025, except for Asia, where the second quarter was stronger than the first.
Key Questions and Answers
- What is the revised timeline for the peak impact of tariff increases on global trade? The WTO now projects that the impact will peak in 2026, not 2025 as initially expected.
- How will North American trade be affected by rising tariffs? Imports are projected to decrease by 4.9% in 2025 and further drop to 5.8% in 2026, while exports are expected to decline by 3.1% and 1.0% in the respective years.
- Which regions are expected to contribute positively to global trade growth? Asia is projected to make the largest positive contribution in 2025, followed by modest contributions from Europe and the rest of the world in both 2025 and 2026.
- What are the projected growth rates for global merchandise trade? The WTO economists’ adjusted trade growth projections for 2025 are 2.4%, while the 2026 projection is considerably weaker at 0.5%.
