The WTO warns that the full impact of recent US tariffs may cause disruptions extending into 2026, amid legal battles and shifting trade dynamics, threatening a fundamental overhaul of global commerce.
World trade faces potential disruption extending into 2026 as the full impact of recent United States tariffs emerges, according to World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala. Speaking to Reuters, she highlighted that the current surge in global trade volumes, largely driven by frontloading in the first half of the year, masks underlying risks. “Possibly down the line, we’ll begin to see some other impacts, as the goods in the warehouses are exhausted,” she warned.
The WTO has recently revised its global trade growth forecasts. Economists now predict a 0.9% increase in trade turnover for 2025, an upward adjustment from the earlier forecast of a 0.2% decline following the imposition of U.S. tariffs earlier this year. However, growth in 2026 is expected to slow to 1.8%, down from an initial 2.5% projection. This reflects caution about the lingering effects of trade tensions, particularly the extensive tariffs introduced by the Trump administration.
The tariffs, announced first on April 2 and expanded on August 1, impose rates between 15% and 41% on goods from more than 60 countries and the European Union. Countries such as Syria, Laos, Myanmar, Switzerland, Iraq, and Serbia face some of the highest duties. Okonjo-Iweala described the situation as an unprecedented disruption to the global trade system, noting the share of trade under WTO’s most favoured nation (MFN) terms has dropped from about 80% to 72%, a level not seen in 80 years.
The broader implications of these tariffs have drawn political and economic scrutiny worldwide. Bank of Japan Deputy Governor Ryozo Himino offered a rare politically nuanced interpretation, asserting that the tariffs are not merely economic tools but part of a wider socio-political movement under the Trump administration. He described the strategy as a fusion of political, economic, and cultural elements, aimed not only at improving trade terms but also at challenging established norms, pursuing economic security, fairness, and asserting a form of domestic redistribution.
Legal challenges to Trump’s tariff strategy have intensified. A U.S. federal appeals court recently ruled that former President Trump overstepped his authority by using the International Emergency Economic Powers Act (IEEPA) to impose broad, unilateral tariffs without Congressional approval. This ruling threatens nearly $300 billion in tariffs, which were imposed under the argument of a national emergency—a justification the court found invalid for tariff implementation. Despite this, the tariffs will remain in force until at least October 14 pending appeals, with the Trump administration seeking expedited Supreme Court review. Treasury Secretary Scott Bessent expressed confidence that the Court will uphold the administration’s application of the 1977 emergency powers law.
However, this legal uncertainty poses risks to the future of U.S. trade policy and to businesses affected by these tariffs. While certain sector-specific tariffs, like those on steel and aluminium, remain untouched by the court rulings, the broad reciprocal tariffs face potential revocation or refund. The court’s verdict underscores tensions between presidential emergency powers and Congressional authority over trade policy, an issue likely to be further clarified through ongoing and future litigation.
Diplomatic frictions have also escalated, as some countries such as India have seen their tariff rates double amid disputes, notably regarding Russian oil imports. Market reactions to the initial tariff announcements were significant, with U.S. stock indices experiencing notable declines, reflecting investor concerns over the impact on global economic stability.
In sum, while early-year trade activity painted a more optimistic picture, major uncertainties persist due to the sweeping U.S. tariffs and their legal and economic ramifications. The WTO’s warnings and central bank observations signal that global trade dynamics might face continued turbulence, with potential systemic shifts in international economic relations unfolding over the next year.
Source: Noah Wire Services
