The global trade outlook has "deteriorated sharply" following the United States' worldwide tariff wars, the World Trade Organization warned on Wednesday.

According to the WTO's latest "Global Trade Outlook and Statistics" report, the volume of global goods trade is expected to decline 0.2 percent this year, which is almost 3 percentage points lower than it would have been without the recent tariff hikes by the US. A modest recovery of 2.5 percent is expected next year, the report said.

Ralph Ossa, the WTO's chief economist, said, "This marks a notable reversal from earlier in the year, when our economists anticipated continued trade expansion, supported by improving macroeconomic conditions.

"Following a strong performance in 2024, global trade is now facing headwinds from a surge in tariffs and rising trade policy uncertainty," he said.

The report highlighted important risks to the forecast, including the possible implementation of the US' currently suspended "reciprocal tariffs" — referring to Washington's 90-day pause of the tariffs for most countries — and broader spillover effects of trade policy uncertainty beyond US-related trade relationships.

If implemented, the "reciprocal tariffs" — along with widespread trade policy uncertainty — would lead to a 1.5 percent drop in global goods trade volume this year, the WTO said.

It forecasts that North America would subtract 1.7 percentage points from global goods trade growth, turning the overall figure negative, while Asia and Europe would continue to contribute positively, but at lower rates.

The WTO expects world GDP to grow 2.2 percent this year, or 0.6 percentage point below the baseline, before recovering slightly to 2.4 percent next year. North America would again bear the brunt, with growth slowing by 1.6 percentage points.

Observers said that following the surge in tariffs, trade between the US and China, the world's two largest economies, is expected to plummet. Although US-China trade accounts for only about 3 percent of global trade in goods, the impact of the downturn could have far-reaching consequences.

WTO Director-General Ngozi Okonjo-Iweala said the WTO, whose 166 members represent 98 percent of global trade and GDP, is a venue for dialogue and cooperative action, and many members are talking to one another on how to strengthen and safeguard the rules while trying to reform the system.

Meanwhile, a report published on Tuesday by the Washington-based Peterson Institute for International Economics said the global economic outlook "has deteriorated significantly in recent months".

The report projects that real global GDP will grow 2.7 percent this year, while US economic growth is expected to stall and the country will see rising inflation and unemployment.

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