Merchandise trade volume growth stronger than expected in Q1 2025, says WTO report

The World Trade Organization reported global merchandise trade volumes grew a stronger-than-forecast 3.6% quarter-on-quarter in Q1 2025, driven by a significant surge in North American imports ahead of anticipated U.S. tariffs. This positive start prompted the WTO to upwardly revise its full-year 2025 trade growth forecast from a 0.2% contraction to a flat 0.1%, though it expects a slowdown later in the year as inventories normalize and higher tariffs weigh on import demand.

Analysis

Global merchandise trade volume demonstrated unexpected strength in the first quarter of 2025, expanding 3.6% quarter-on-quarter and 5.3% year-on-year, significantly outperforming forecasts. This surge was disproportionately driven by a 13.4% quarterly import increase in North America, a phenomenon the World Trade Organization attributes to importers front-loading orders to preempt anticipated U.S. tariffs. Consequently, the WTO has upwardly revised its full-year 2025 trade growth forecast from a 0.2% contraction to a flat 0.1% expansion. However, the report carries a cautious outlook, anticipating a slowdown in the latter half of the year as the pull-forward effect subsides, inventories are fully stocked, and higher tariffs begin to weigh on demand. Sector-level data reveals a significant divergence: trade values for office and telecom equipment grew 16% YoY, while automotive products and iron and steel contracted by 4% and 3% respectively, indicating an uneven and concentrated recovery.

Key Decisions for Investors

• Investors should treat the strong Q1 global trade figures with caution, as the growth appears to be a temporary pull-forward effect driven by tariff anticipation rather than a signal of sustained underlying demand.
• The significant divergence in sector performance, with office and telecom equipment trade up 16% while automotive products fell 4%, suggests a need to re-evaluate cyclical exposures, potentially favoring technology supply chains over industrial and automotive sectors.
• Monitor corporate inventory levels and margin guidance closely in upcoming earnings seasons, as the WTO's forecast of a slowdown due to stocked inventories and tariffs presents a headwind for companies reliant on global merchandise trade.