Tariffs Creating Global Trade Uncertainty

Trade policy uncertainty and the prospect of more tariffs could disrupt global goods trade, according to a World Trade Organization report released this week.  Global goods trade was steady in the fourth quarter of last year and appear to continue growing in the first months of 2025, but that could be undone by a looming global trade war.

The WTO Goods Trade Barometer was at 102.8, nearly unchanged from the previous reading of 102.7 from last December. The Goods Trade Barometer is a composite leading indicator for world trade, providing real-time information on the trajectory of merchandise trade relative to recent trends. Barometer values greater than 100 are associated with above-trend trade volumes, while barometer values less than 100 suggest that goods trade has either fallen below trend or will do so in the near future.

Latest Reading

The latest reading of 102.8 for the barometer index is above both the quarterly trade volume index and the baseline value of 100. This would normally signify that merchandise trade was above trend, with accelerating growth. But rising trade policy uncertainty could have temporarily boosted trade as businesses and consumers frontloaded imports ahead of potential measures, possibly reducing demand later in the year.

As a result, the barometer index should be interpreted with caution, the WTO said. In the third quarter of 2024 the volume of world merchandise trade continued to recover from the trade slump of 2023, growing 3.3 percent year-on-year. Developments in the first three quarters last year were broadly in line with the WTO's most recent trade forecast of October 10, which predicted trade volume growth of 2.7 percent for the whole of 2024.

Although the global average remained steady, there were some significant regional disparities in goods trade growth. In particular, European exports and imports were much weaker than anticipated, while Asian exports and North American imports exceeded expectations.

All of the barometer's component indices are currently on or above trend. Export orders (101.0), electronic components (102.3) and raw materials (101.6) are on trend, while indices for automotive products (105.5), container shipping (103.7) and air freight (102.7) are above trend to varying degrees. Export orders, which are usually the most predictive barometer component, remain close to the baseline value of 100, the WTO said.