• The share of global trade conducted under World Trade Organization terms has fallen to 72%, a multi-decade low, with further decline projected.
  • The WTO's latest outlook projects a 0.2% contraction in merchandise trade volume for 2025, a sharp downgrade from previous 3% growth forecasts.
  • Escalating tariffs, particularly from renewed US trade barriers and retaliatory measures, are driving the fragmentation and economic uncertainty.

A Weakening Foundation

The framework governing international commerce is showing significant strain, with the WTO Director-General revealing that the share of global trade conducted under the organization's terms has fallen to just 72%. This erosion of the rules-based system coincides with a dramatic downgrade in the WTO's own trade outlook, which now projects a 0.2% contraction in world merchandise trade volume for 2025—a stark reversal from the 3% growth previously forecast.

The decline is directly linked to a recent global surge in tariffs. Renewed US trade barriers against multiple partners and the subsequent retaliatory moves by other major economies have created a climate of profound uncertainty for businesses and investors. While a temporary 90-day pause in some reciprocal US-China tariffs provided brief respite, the underlying tensions continue to destabilize global supply chains. According to people familiar with the matter, without a swift return to multilateral engagement, the contraction could deepen to 1.5% next year.

Regional Impacts and Shifting Flows

North America is projected to be the epicenter of the trade slowdown, with exports forecast to plummet 12.6% and imports to drop 9.6% in 2025. The direct impact of rising tariffs is forcing a realignment of global trade routes. Analysts note that Chinese exporters, facing reduced access to the US market, are aggressively redirecting goods to other global markets, creating new competitive pressures elsewhere.

This fragmentation is pushing companies toward more bilateral and regional agreements, undermining the multilateral system the WTO was designed to uphold. The organization itself is now urging members to pursue reforms to modernize its agreements and restore a level playing field. Efforts to reach the WTO for additional comment on the reform process were not immediately successful.

The situation presents a particular threat to developing and vulnerable economies, which rely more heavily on predictable, rules-based access to global markets for their growth. The increased costs and supply chain disruptions are expected to filter through to consumers in the form of higher prices for imported goods, adding to inflationary pressures in many countries.