Policy uncertainty may alter trade growth direction, WTO warns

Global goods trade appeared to remain steady in Q4 2024 and looked set to continue growing in Q1 of 2025 as the WTO Goods Trade Barometer ticked up to 102.8, nearly unchanged from the previous reading of 102.7 from last December.

However, increased trade policy uncertainty and the prospect of new tariffs could weigh on trade in the medium term.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. Values greater than 100 are associated with above-trend trade volumes, while values less than 100 suggest that goods trade has either fallen below trend or will do so in the near future.

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. However, rising trade policy uncertainty could have temporarily boosted trade as businesses and consumers’ frontload imports ahead of potential measures, possibly reducing demand later in the year. As a result, it said, the index should be interpreted with caution.

In Q3 2024, the volume of world merchandise trade continued to recover from the trade slump of 2023, growing 3.3 per cent year-on-year. Developments in the first three quarters last year were broadly in line with the WTO’s most recent trade forecast, which predicted trade volume growth of 2.7 per cent 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 report noted.