Global goods trade should rebound this year, but more slowly than previously expected, after only its third decline in 30 years in 2023, the World Trade Organization said on Wednesday.
The Geneva-based trade body said easing inflationary pressures should help the volume of merchandise trade increase by 2.6% in 2024 and by 3.3% in 2025, after a 1.2% decline last year. The WTO had previously forecast a 3.3% rise in 2024.
At the same time, the WTO warned of risks from trade fragmentation due to geopolitical tensions, rising protectionism and a worsening Middle East crisis in which attacks on commercial ships in the Red Sea have already diverted trade between Europe and Asia.
Before last year, global trade had only fallen in two years since the WTO was formed in 1995. Global trade fell 5% during the pandemic in 2020 and more than 12% during the global financial crisis of 2009.
In 2023, import demand was particularly weak in Europe, where the impact of higher energy prices and inflation was most intense.
The WTO said risks to its 2024 forecast were skewed to the downside, with its forecast range from minus 1.6% to plus 5.8%.
In a sign of rising geopolitical tensions in the past days, U.S. Treasury Secretary Janet Yellen warned China that Washington will not accept new industries being decimated and the European Union opened a new front against Beijing with an investigation into Chinese wind turbine makers.
WTO Chief Economist Ralph Ossa said there was evidence of trade fragmentation, but not deglobalisation, with trade growth continuing but at a rate slower than in the 1990s.
The WTO has previously estimated a full decoupling of the world into geopolitical blocks could reduce global GDP by 5%.
On the Red Sea, through which 12% of global trade normally passes, the WTO said shipping had reduced but not halted and maritime freight rates were contained.
Ossa said the situation needed to be closely monitored, adding the risk of oil price spikes from an escalation of the Middle East crisis would probably be more significant than Suez Canal disruption itself.
“As soon as energy prices are affected significantly, then of course we feel repercussions on international trade,” he said.
