India’s exports could come under pressure next year as the World Trade Organisation (WTO) has sharply lowered its global trade forecast for 2025. The WTO now expects world merchandise trade volume to shrink by 0.2% in 2025, a big drop from its earlier projection of 2.7% growth. This revision comes after factoring in the U.S.’s decision to impose a 10% baseline tariff on imports.
India’s Trade Performance in 2024
In 2024, India’s merchandise exports grew by 2.6%, while imports increased by 6.6%. But the global trade environment may turn more challenging due to rising tariff barriers and policy uncertainty.
Read More How Much Does an Audi Cost After Union Budget 2025 Reduced Customs Duty on Imported Cars?
Trump-Era Tariffs Could Return
The WTO warned that if the U.S. reintroduces country-specific reciprocal tariffs, especially under Donald Trump’s administration, it could lead to a 1.5% drop in global trade in 2025. The report added that rising uncertainty around trade policies is also making global trade conditions more volatile.
Regional Impact of Trade Policy Changes
The effects of these tariff changes are not the same across regions. According to the updated forecast:
- North America is expected to reduce global trade growth by 1.7 percentage points, pushing overall trade into negative territory.
- Asia and Europe will still add to trade growth, but their contributions will be smaller.
- Asia’s share in global trade growth could be cut in half to just 0.6 percentage points.
- Other regions like Africa, West Asia, and Latin America will contribute positively but to a lesser extent than before.
US-China Trade Disruption to Redirect Exports
The WTO also noted that the U.S.-China trade conflict will likely divert trade routes. As the U.S. reduces imports from China—particularly in textiles, apparel, and electrical goods—other countries may find new opportunities to fill that gap. This could benefit some least-developed countries by allowing them to boost their exports to the U.S.
Services Trade Also to Suffer
While services like travel and logistics are not directly affected by tariffs, they still feel the impact. A slowdown in goods trade reduces demand for related services. The WTO now expects global services trade to grow by only 4% in 2025 and 4.1% in 2026—down from earlier forecasts of 5.1% and 4.8%.
Slower Global GDP Growth Expected
The global economy is also likely to be affected. The WTO projects global GDP to grow by 2.2% in 2025—down 0.6 percentage points from the no-tariff-change scenario. The biggest impact will be felt in:
- North America: −1.6 points
- Asia: −0.4 points
- South and Central America: −0.2 points
If trade policy uncertainty spreads, global GDP growth could fall by as much as 1.3 percentage points.
India’s Position in Global Trade Slips
India slipped slightly in global trade rankings in 2024:
- It moved down to 14th among top merchandise exporters (excluding intra-EU trade), though its global share stayed at 2.2%.
- It dropped to 7th among top merchandise importers, with its share holding at 3.4%.
- In services, India ranked 6th in both exports and imports of commercial services (excluding intra-EU trade). However, its share of service exports fell from 5.4% to 5.3%, and for imports from 4.2% to 4.1%.
Conclusion
The WTO’s revised outlook signals turbulent times ahead for global trade, especially for emerging economies like India. While India saw modest export growth in 2024, rising protectionism, US-China trade tensions, and policy unpredictability could limit its trade momentum. India may need to diversify export markets, tap into emerging opportunities, and strengthen its domestic economy to cushion the impact of a potential global trade slowdown.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
