World trade to rebound in second half year but tariff pressures cast shadow - outlook

Global trade is regaining its footing after a subdued start to the year, but concerns over escalating tariffs continue to loom large.

According to the August forecast update by the World Trade Organisation (WTO), merchandise trade is projected to grow by 0.9 per cent in 2025, revising earlier predictions of a 0.2 per cent contraction made in April.

WTO economists attribute the improved outlook largely to frontloading of imports in the US, as businesses seek to circumvent higher duties.

Import volumes in the world’s largest economy jumped 11 per cent year-on-year in the first half of 2025, driven by the frontloading and stockpiling efforts.

Second, the organisation attributes the upgrade to a more optimistic global macroeconomic outlook, which it notes has improved beyond what many economists had anticipated in April.

“Contributing to the improved climate has been the depreciation of the US dollar against other currencies, which should ease financial conditions for developing economies,” WTO said.

“Falling oil prices should also support growth in manufacturing economies, although it may simultaneously reduce import demand in oil producing regions.”

However, the overall tone of the upgrade remains cautious, mainly on the back of the recent tariff changes.

The higher “reciprocal” tariff rates introduced on August 7 are expected to place mounting pressure on US imports and dampen exports from its trading partners through the second half of 2025 and into 2026.

As a result, the revised trade growth forecast remains significantly below the earlier 2.7 per cent projection made prior to the latest round of tariff hikes, a clear indication that protectionist measures are already constraining global trade flows.

While the short-term forecast shows a slight rebound, longer-term projections suggest that the global trading system remains under strain.

“Higher tariffs over time will weigh on trade, bringing next year’s expected trade volume growth down to 1.8 per cent from 2.5 per cent previously,” reads the report.

The April report had painted a bleaker picture, forecasting a 0.2 per cent contraction in global trade, with North American exports predicted to plunge by 12.6 per cent.

It also warned of deeper risks, such as reciprocal tariffs and spillovers from policy instability, which could drive trade volumes down by as much as 1.5 per cent.

For the first time, the April report also included a services trade outlook, projecting 4.0 per cent growth in 2025.

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While still robust, this figure is about one percentage point less than expected, indicating that trade in both goods and services remains vulnerable to rising global tensions and fragmented economic policies.