Tariffs expected to slow global trade, adding another risk to the US economy
WASHINGTON (TNND) — Global trade is expected to slow next year because of President Donald Trump’s sweeping tariff regime that has upended supply chains and added new hurdles for international businesses to navigate with rampant uncertainty about what’s coming next.
Trump’s tariffs have set off a flurry of activity between countries trying to make trade deals with the U.S. to limit the impact tariffs will have on their major industries, pushed many to seek new trade agreements that do not include America and put businesses in the challenging position of having to decide whether to remake international supply chains with no guarantees that trade policy will remain consistent in the near future.
The World Trade Organization forecast in a report released on Tuesday that global trade will slow next year as fewer goods and services move between countries. It had originally forecast an expansion of 1.8% in 2026, which was cut down to just 0.5%.
It comes after trade beat the WTO and many other economists’ predictions after Trump’s announcement of the sweeping tariffs. Goods trade is expected to expand 2.4% this year after an earlier forecast of 0.9%.
Most countries opted for negotiations with the Trump administration or found alternative trade agreements to fill the gaps, helping mute the impacts on the global economy beyond what was originally feared. Businesses trying to get ahead of the tariffs going into effect also helped drive global trade volumes in 2025 and kept prices stable for American consumers, but those trends could soon reverse as bulked up inventories run out and the full effects of the tariffs set in.
“Trade growth is expected to slow in 2026 as the global economy cools and as the full impact of higher tariffs is finally felt for a full year,” the WTO said in its report.
Industries that are sensitive to tariffs such as automakers are already starting to feel the brunt of tariffs with several major manufacturers reporting significant losses. The administration has framed the losses as temporary setbacks that will ultimately lead to a revitalized manufacturing industry in the U.S. and help bolster the economy moving forward.
Government data on U.S. imports and exports for August, when most of Trump’s tariffs went into effect, that was supposed to be released on Tuesday has been delayed due to the government shutdown. Import volume at America’s major ports is projected to fall by over 5% this year, according to an August report by the National Retail Federation and supply chain consulting firm Hackett Associates.
“If things change in the U.S. six months or years from now, these countries are not going to turn it on a dime again to reconfigure back to us. There’s a bit of inertia in the whole process and once that inertia is broken, in terms of moving from the U.S. as supplier to somebody else, there’s going to be inertia to just keep it that way also. This has long-term consequences,” said Joe LiPuma, clinical associate professor at Boston University’s Questrom School of Business.
Trump’s sweeping tariffs, which include double-digit taxes on nearly all of America’s biggest trading partners along with higher levies on specific items like steel and cars, have roiled financial markets and sent shockwaves throughout the global economy. Even with trade agreements and pullbacks on some of the most aggressive rates originally announced, the average tariff rate in the United States is the highest it has been in decades.
Trade deals between the U.S. and other major countries have also been challenging to come by and have frequently had to exclude details on some of the most contentious economic issues. The U.S. is still without permanent deals with some of its biggest trading partners like Mexico and Canada, and the agreement in place with China still faces several sticking points and risks tariffs escalating higher again.
“Some degree of stability with tariffs helps, because now we know what we’re dealing with, but there’s just dealing with the uncertainty of what else is going to happen,” LiPuma said. “All these things kind of still conspire to just make the U.S. less competitive.”
The result has been constant uncertainty for businesses, many of which rely on foreign supply chains that are subject to shifting tariff rates. Many major retailers in the U.S. have been willing to absorb increased prices from tariffs so far, but economists and industry analysts are not expecting that to last as costs mount and put a dent in profits.
Higher prices getting passed onto consumers could weigh on consumer spending, which makes up a majority of U.S. economic activity. Consumers have been willing to spend throughout the year despite the tariff headwinds, but concerns are bubbling that momentum may be stalling as budgets get stretched thin and the job market has stalled out.