Tariffs’ Effect on World Trade

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Top of the Agenda

Global trade this year has been stronger than expected following U.S. tariffs, but its growth will slow sharply in 2026, the WTO estimated in a report published yesterday. The impact of U.S. tariffs was delayed by countries stockpiling goods before tariffs hit and growing trade related to artificial intelligence (AI), as well as increased trade among countries outside the United States. WTO Director-General Ngozi Okonjo-Iweala praised “the rules-based multilateral trading system” for cushioning the tariffs’ impact, but warned that continued policy uncertainty “doesn’t mean we are home free.” 

The details. Global goods trade will grow 2.4 percent in 2025, up from the .9 percent expected in August, the WTO estimated. Next year, the WTO expects its growth to slow to .5 percent. Almost half of the goods trade growth in the first six months of the year was due to AI-related merchandise like semiconductors, servers, and communications. Meanwhile, trade among developing countries grew faster than the global average. Countries’ reluctance to retaliate to U.S. tariffs has somewhat muted their global effects.  

Open questions. It remains uncertain whether the United States and China will reach a long-term trade deal after repeatedly delaying higher tariffs this year. After months of talks between senior trade officials, U.S. President Donald Trump and Chinese President Xi Jinping are due to meet later this month at an Asia economic forum. Trump has also said that further sector-specific tariffs are in the works. Currently, the U.S. government shutdown is limiting visibility into the country’s trade activity, with a report due yesterday on U.S. imports and exports remaining unreleased.

Across the Globe

EU floats steel tariff. European Union (EU) leadership announced a proposal yesterday for a 50 percent tariff on steel and lower quotas for duty-free steel imports. The measures respond to both an influx of cheap Chinese steel and Trump’s 50 percent steel tariffs. The EU said the steps were WTO-compliant and that it remains open to negotiating with some partners, such as the United Kingdom (UK). Its proposal would require approval by member states and the European Parliament.

Talks on Gaza. U.S. envoy Steve Witkoff and Trump’s son-in-law Jared Kushner, as well as Qatari Prime Minister Sheikh Mohammed Abdulrahman Al Thani, arrived in Egypt today for the third day of Gaza peace talks. Hamas has submitted a list of Palestinian prisoners in Israel that it wants released as part of Trump’s peace plan. Israeli Prime Minister Benjamin Netanyahu did not immediately comment on the list but said yesterday the talks were in their “fateful days of decision.” The head of Turkey’s intelligence service is also participating in the talks.

Houthi detentions. Yemen’s Houthi rebels have detained nine United Nations employees, bringing the total number of UN workers seized in Houthi-held territory since 2021 to fifty-three, a UN spokesperson said late Monday. Secretary-General António Guterres strongly condemned the detentions of UN staff and other personnel from NGOs and civil society groups, calling for their immediate release.

Taliban visit Russia. Russia plans to expand business, anti-narcotics, and counterterrorism cooperation with Afghanistan, Russian Foreign Minister Sergey Lavrov said as a Taliban delegation visited Moscow yesterday. He also called military deployments by “extra-regional players” in Afghanistan unacceptable, indirectly referencing Trump’s suggestion last month that the United States retake control of Bagram Air Base—a proposal the Taliban rejected.

Espionage in Estonia. A soldier in Estonia’s voluntary defense organization was convicted of spying for Russia and sentenced to five years in prison. Before being arrested earlier this year, he had passed information to Russia about Estonian military readiness in the border city of Narva. Russia has previously used spies in the area, which has a majority Russian-speaking population.

New DFC head. The U.S. Senate yesterday confirmed investor Ben Black to lead the U.S. International Development Finance Corporation (DFC), a $60 billion agency that makes loans and investments in projects around the world. Black said he seeks to increase Wall Street involvement in DFC projects. 

Germany’s industrial woes. The country’s industrial output fell sharply in August to levels unseen since 2005, according to government data released yesterday. Car industry production fell 18.5 percent from July to August. Germany’s auto sector has struggled to compete with Chinese rivals, withstand U.S. tariffs, and manage the transition to electric vehicles. Chancellor Friedrich Merz will meet with auto executives tomorrow to discuss industry challenges. 

Chemistry prize. Susumu Kitagawa, Richard Robson and Omar M. Yaghi won this year’s Nobel Prize in Chemistry for developing a molecular architecture that can pack large amounts of space into small structures. The prize committee said that the metal-organic frameworks “can be used to harvest water from desert air, capture carbon dioxide, store toxic gases or catalyze chemical reactions”—processes that can help address climate change.

What’s Next

• Today, UK Prime Minister Keir Starmer begins a trip to India.

• Today, the annual Draconid meteor shower is expected to peak in the night sky.

• Tomorrow, Seychelles begins its presidential election runoff.