Why Did the WTO Lift Its 2025 Trade Forecast but Cut Outlook for 2026?
About the WTO’s Updated Global Trade Forecast
The World Trade Organization (WTO) has upgraded its forecast for global goods trade growth in 2025 to 2.4%, citing stronger-than-expected recovery in merchandise volumes this year. However, the global trade body simultaneously warned of a sharp slowdown in 2026 as new tariff measures and protectionist policies take effect, especially those linked to the Trump administration’s revised trade strategy.
The WTO highlighted that the global trade system continues to show resilience despite uneven recovery across regions. Manufacturing and commodity exports from Asia have performed better than expected in 2025, aided by strong intra-Asian demand. However, it cautioned that rising trade barriers could reverse these gains in 2026.
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The Changing Global Trade Landscape
According to the WTO’s report, global trade volumes rebounded sharply in mid-2025 as inflation moderated and inventory restocking picked up across manufacturing hubs. Yet, the organization’s economists anticipate a policy-induced deceleration next year once new tariffs and non-tariff barriers are implemented.
The WTO’s analysis shows that North American and European exports may face higher costs due to tariff realignments, while developing economies in Asia and Latin America could partially offset the decline through regional trade agreements and supply chain diversification.
Market analysts suggest that India stands to benefit moderately from trade realignments, particularly in textiles, pharmaceuticals, and engineering goods. However, sustained gains will depend on global consumer demand and the continuation of tariff exemptions under key bilateral deals.
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Trade Forecast Summary
| Year | Trade Volume Growth (%) | Key Factors |
|---|---|---|
| 2024 (Actual) | +1.9% | Rebound in goods movement, easing inflation |
| 2025 (Forecast) | +2.4% | Stronger consumption, Asian export resilience |
| 2026 (Forecast) | +0.8% | Trump tariffs and trade tensions dampen growth |
Impact on India and Emerging Economies
For India, the trade moderation could create both challenges and opportunities. While reduced global demand may affect exports in IT services and metals, India could attract supply-chain relocations as companies seek tariff-free destinations. Moreover, sectors such as defence, renewable energy, and infrastructure may benefit from government-led domestic substitution policies.
Analysts believe that emerging market currencies could experience near-term volatility, particularly against the US dollar, as trade tensions resurface. Investors are advised to watch the movement in bond yields and FII inflows for cues on medium-term equity direction.
Investor Takeaway
The WTO’s upgraded 2025 forecast offers short-term optimism for exporters, but the long-term risks tied to trade fragmentation and protectionism remain. For equity investors, export-heavy sectors could stay range-bound until clarity emerges on tariff timelines and policy responses in 2026.
Explore more insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
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