US Stock Market Slides As WTO Warns Of Worst Global Trade Drop Since 2020, World Bank Pushes Tariff Cuts

World Bank President Ajay Banga on Wednesday urged developing nations to reduce tariffs, warning that rising protectionism, driven in part by the Trump administration’s trade policies, was worsening uncertainty and weakening the global economic outlook.

"Countries need to care about negotiating and dialogue. It's going to be really important in this phase, and the quicker we do it, the better that will be," he told reporters, according to Reuters.

U.S. equity markets were already showing signs of strain in Wednesday afternoon trade. The Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, dropped more than 2.5%, and the SPDR S&P 500 ETF Trust (SPY) fell 1.65%. Meanwhile, the SPDR Dow Jones Industrial Average ETF (DIA) slipped over 1%. 

The declines followed warnings from Nvidia (NVDA), ASML Holdings (ASML), and AMD, which cited revenue losses tied to U.S. export restrictions on China.

Banga said a cautious business environment has emerged amid new U.S. tariffs and retaliatory measures by China and others. While the growth impact would vary by country, he said the overall trajectory had clearly shifted under the Trump administration. 

“The climate has changed,” Banga said, without offering a new forecast.

The World Bank in January projected flat global growth of 2.7% through 2026, and outlined the weakest long-term outlook for developing economies in 25 years.

At the time, it warned that across-the-board U.S. tariffs of 10% could shave 0.3 percentage points from global GDP if met with reciprocal duties.

On Wednesday, the World Trade Organization (WTO) issued a parallel warning. It now expects the volume of global goods trade to decline by 0.2% in 2025 – down from a previous forecast of 3.0% growth. 

The agency warned that President Donald Trump’s recently announced “reciprocal tariffs,” if enacted, would further shrink global trade by 0.6 percentage points, while broader trade policy uncertainty could subtract another 0.8 points.

Combined, those risks could bring the total contraction in trade to 1.5% in 2025, the worst since the COVID-19 pandemic. A modest rebound of 2.5% is forecast for 2026.

World GDP is now expected to grow by 2.2% in 2025, which is 0.6 percentage points below the previous baseline. North America is forecast to see the steepest hit, with growth falling 1.6 points, followed by Asia and Latin America.

The WTO noted that while the U.S.-China relationship remains a focal point, 87% of global merchandise trade takes place outside the U.S., highlighting the broader scope of the risks.

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