LONDON

Rising trade protectionism is signaling a slowdown in global economic and trade growth as the US’ tariffs and reciprocal decisions bring radical changes in trade dynamics.

US President Donald Trump’s 25% tariffs on steel and aluminum imports from China, Mexico, and Canada went into effect last week. China and Canada announced retaliatory tariffs while Mexico said it would respond soon.

The EU announced retaliatory tariffs worth €26 billion ($28.2 billion) against the US.

Trump deems tariffs as a tool to reduce the US trade deficit and protect the country’s national economic interests. However, these tariffs will affect the US and the global economy, as well as the targeted countries.

The Organization for Economic Cooperation and Development (OECD) said in its interim outlook report that the global economy’s growth was downwardly revised from 3.1% to 3% for 2026 due to trade wars and uncertainties.

Fitch Ratings lowered its growth forecast for the global economy from 2.6% to 2.3% in 2025 and from 2.3% to 2.2% for 2026. Fitch also lowered the US’ growth forecast from 2.1% to 1.7% for this year and from 1.7% to 1.5% for next year.

Tariffs may lead to price rises, increased inflation

The World Trade Organization (WTO) warned that trade policy uncertainties and tariffs could pressure trade in the medium term, while the UN Trade and Development (UNCTAD) said uncertainties over this year persist and protectionism and changing trade strategies could disrupt global trade.

Luz Maria de la Mora, director of International Trade and Commodities at the UNCTAD, told Anadolu that the international trade in goods and services rose 3.7% in 2024 but a slowdown came to the fore, not only in trade but also in the global economic growth.

“If we continue to see unilateralism, (such as) more tariffs, that may slow down the pace of the global economy,” she said.

“We are working on explaining to member states (that) multilateralism (and the) rules of the international trading system are (the) guarantees … that they need to push (in) international trade,” she added.

De la Mora stated that tariffs may increase the prices of some products from uncertain countries, which could result in an impact to the US market’s competitiveness. She noted raising tariffs that harm other trade partners to resolve national issues will have negative repercussions.

She emphasized that imposing a tariff results in “increasing prices” and it brings inflation.

“We may end up seeing different trends in terms of international trade, production, and in how the industry settles itself,” she said.

Member states should make use of all mechanisms in multilateral trade

De la Mora stated that the dispute settlement mechanism of the WTO is still dysfunctional, with regard to Canada and China’s complaints to the organization, noting that it lacks an appellate body.

“Member states should make use of all the mechanisms that are available within the multilateral trading system,” she said.

“It is also important to give the opportunity to WTO to assess these cases and let us know how these cases are bringing issues that are in line or not with the WTO rules, and (it) may also offer the opportunity to discuss how to best address them—if it’s through dispute settlement or maybe to help push for the reform of WTO, which is an agenda that has been in place for many years and may help to inform the debate,” she noted.

“Resilience comes from trade rules -- we have a multilateral trading system under WTO that every member states, 166 members should continue to push for,” she added.

De la Mora emphasized that the WTO provides rules to act without uncertainty when it comes to market access and all actors in global trade should act accordingly.

She highlighted that an open global trade system based on rules would be the best way to promote trade growth and ensure cooperation and stability while at it, underlining that the multilateral system offers solutions even in the direst times.

De la Mora noted that the resilience in regional trade, especially in developing countries, is on the rise, with a 4% growth seen last year.

She also said the global trade and the rules of the system are key for developing countries to maintain their share and it is crucial to support a rules-based multilateral trading system to enable all developing countries to participate and benefit from global trade.