The World Trade Organization (WTO) has lowered its forecast for global trade, warning that instead of growing, trade in goods will actually shrink this year. It now expects a 0.2% decline in global merchandise trade, a major drop from its previous forecast of 3% growth made in October.

This sharp downgrade is linked to rising trade tensions, especially involving the United States. The WTO warned that if the US brings back full tariffs — like those previously introduced by former President Donald Trump — global trade could fall even more.

With the return of higher tariffs and their ripple effects around the world, the WTO says trade could drop by as much as 1.5%, which would be the worst decline since the COVID-19 pandemic in 2020.

WTO Director General Ngozi Okonjo-Iweala said this drop is a serious concern. She added that falling trade can affect the entire global economy, including financial markets and especially developing countries, which are more vulnerable to such shocks.