Frontloading, measured responses cushion tariff impact in 2025: WTO

The upgrade is mostly due to frontloading of imports in the United States, WTO economists said in a recent forecast update.

However, higher tariffs over time will weigh on trade, bringing next year’s expected trade volume growth down to 1.8 per cent from 2.5 per cent earlier.

A surge of imports in the United States in the first quarter (Q1) ahead of widely anticipated tariff hikes contributed to the upward revision to the forecast for 2025 issued in the April Global Trade Outlook and Statistics report.

Increased tariffs—including those that took effect recently—will dampen trade in Q2 2025 and in 2026, the update said.

Asian economies are projected to remain the largest positive driver of world merchandise trade volume growth this year, although their contribution next year will be smaller than predicted in April.

North America will weigh negatively on global trade growth in both 2025 and 2026, but its negative impact this year will be smaller than previously estimated due to stronger-than-expected frontloading of imports in the United States in Q1 2025.

Meanwhile, Europe's contribution to trade in 2025 has gone from moderately positive to slightly negative.

Other regions, including economies whose exports are largely energy products, will see their positive contribution to trade growth shrink between 2025 and 2026 as lower oil prices reduce export revenues and dampen import demand, the updated noted.

North America's imports are expected to decline by 8.3 per cent in 2025, less than the 9.6 per cent drop foreseen in the April forecast. This positive impact was matched by a stronger-than-expected 4.9-per cent rise in exports of Asia, up from 1.6 per cent in the previous forecast.

Europe's export and import growth this year of minus 0.9 per cent and 0.4 per cent respectively will be slightly weaker than WTO predicted in April, while North America's exports will be less negative (minus 4.2 per cent).

On balance, the forecast for merchandise trade growth in 2025 has improved to 0.9 per cent, which can be broken down into two positive factors and one negative one.

First, US imports surged in the first half of 2025, up 11 per cent year-on-year in volume terms, due to frontloading and inventory accumulation. This rise included a sharp 14 per cent quarter-on-quarter increase in Q1 followed by a 16 per cent drop in Q2 (on a seasonally-adjusted basis).

Moving imports forward to Q1 should result in lower import demand in the future.  This correction is expected to come in the second half of 2025, but some will occur only in 2026 and beyond. Hence, this factor will temporarily boost the outlook for 2025 trade. This frontloading factor contributes most to the updated forecast.

Second, the global macroeconomic outlook is now more favourable than many economists expected back in April. Contributing to the improved climate has been the depreciation of the US dollar against other currencies, which should ease financial conditions for developing economies.

Falling oil prices should also support growth in manufacturing economies, although it may simultaneously reduce import demand in oil producing regions, the WTO update noted.

Third, recent tariff changes are expected to have an overall negative impact on the outlook for global trade compared to the April forecast. This stems from a combination of factors.

On the one hand, the US-China truce and exemptions for motor vehicles are contributing positively; on the other hand, higher reciprocal tariff rates introduced on August 7 are expected to weigh increasingly on imports in the United States and depress exports of its trading partners in the second half of 2025 and in 2026, the update added.

ALCHEMPro News Desk (DS)