Global Trade Under Threat from Trump's Tariffs

The World Trade Organization (WTO) has warned that the global trade outlook for 2025 has "deteriorated sharply" due to a surge in tariffs and trade policy uncertainty, largely driven by US President Donald Trump's tariffs regime. The WTO now expects the volume of world merchandise trade to decline by 0.2% in 2025, before recovering by 2.5% in 2026. North America is expected to be particularly affected, with exports forecast to drop by 12.6% in 2025. The WTO also warned of "severe downside risks" including the application of reciprocal tariffs, which could lead to a sharper decline in global goods trade.

Hong Kong's postal service has suspended handling packages to and from the US in response to US President Donald Trump's decision to eliminate a tariff exemption for items worth $800 or less shipped from Hong Kong. The exemption's removal would have led to tariffs of up to 120% on such items. The suspension affects packages transported by sea and air, but not postal items containing only documents. As a result, companies and individuals in Hong Kong will have to use private couriers, increasing costs. Hong Kong's leader has condemned the US tariffs and announced plans to file a complaint with the World Trade Organization.

China's economy grew 5.4% in the first quarter of 2025, exceeding expectations of 5.1%, despite the looming impact of US President Donald Trump's tariffs. The strong growth was driven by exports, which surged 12.4% in March, and consumer spending, with retail sales rising 5.9% in March. However, economists believe it will be challenging to maintain this momentum due to the tariffs, which have now exceeded 145%. UBS economists have downgraded their growth forecast for 2025 to 3.4%, while Goldman Sachs expects growth to slow to 4% and 3.5% in 2025 and 2026, respectively. China's government remains optimistic, pointing to a diversified trade landscape and plans to boost domestic consumption to mitigate the impact of the tariffs.

The World Trade Organization (WTO) has warned that the ongoing global trade war, sparked by President Donald Trump's tariffs, will significantly hurt the US and global economies. The WTO projects that global trade will shrink by 0.2% this year, compared to a 2.7% growth forecast without tariffs, and global economic output will grow by 2.2%, 0.6 percentage points lower than expected. North America will be particularly affected, with economic output expected to be 1.6 percentage points below normal. The trade war is expected to lead to fewer and lower-paid jobs, financial difficulties, and reduced spending by companies and governments.

Donald Trump's proposed 10% blanket tariff, although considered less radical than previous proposals, still poses significant economic risks, including higher inflation, lost jobs, and slower growth. The tariff rate is deemed "quite extreme" by economists, comparable to levels seen in the 1930s. Research suggests that a 10% tariff could cost the average American household $1,700 to $2,350 more per year. Domestic manufacturers may raise their prices when tariffs on foreign goods increase, limiting potential savings from switching to American brands. The total package of tariffs in effect could cause world trade to fall 5% this year, comparable to the pandemic's impact in 2020, and slice projected overall growth by 1%. The chaotic rollout of tariffs has contributed to consumer and business uncertainty, plunging confidence and paralyzing purchases. Poor and emerging economies, particularly those reliant on commodity exports, are also likely to be negatively impacted.