Global Trade Faces Renewed Headwinds from Middle East Conflict and Trump Tariffs

Global trade is confronting a challenging landscape as the prolonged conflict in the Middle East and the re-imposition of tariffs by the Trump administration create significant headwinds. Europe, in particular, is expected to bear the brunt of these disruptions, with potential impacts on economic growth, energy prices, and food security.

WTO Report Highlights Slowing Trade Growth

The World Trade Organization (WTO) recently published a report indicating a marked slowdown in global trade growth. The forecast has been revised down from 4.6% in 2025 to 1.9% in 2026. Further declines are possible, potentially reaching 1.4%, if the Middle East conflict escalates and drives up energy prices and disrupts global transportation routes. [1]

Middle East Conflict Disrupts Key Trade Routes

The conflict in the Middle East poses a significant threat to critical shipping lanes, most notably the Strait of Hormuz, which handles roughly a quarter of the world’s oil trade. [1] Disruptions to traffic through this strait could lead to higher fuel prices and increased logistics costs globally, impacting businesses and consumers in Europe and beyond. The region is a key source of fertilizers, with approximately 30% of global urea imports passing through the area. Disruptions could affect major agricultural producers like India, Thailand, and Brazil. [1]

Gulf states themselves face food security challenges, with high import dependence – averaging 75% for rice and exceeding 90% for corn, soybeans, and vegetable oil – making them vulnerable to higher costs if alternative routes are required.

Trump Tariffs Add to Economic Uncertainty

Adding to the global economic uncertainty, President Trump has announced new tariffs on exports to the United States from over 90 countries. [2] These tariffs, initially set at 10% and potentially rising to 15% for countries with significant trade deficits with the US, have already contributed to market volatility. [2] Despite a Supreme Court ruling against previous tariffs based on the International Emergency Economic Powers Act (IEEPA), the White House has re-imposed a 10% duty using alternative legal justifications. [4]

The US Customs agency is now processing over $130 billion in tariff refunds to businesses, including Costco and FedEx, that were previously deemed illegal. [4]

Europe Particularly Vulnerable

The WTO has identified Europe as particularly vulnerable to these combined pressures. As an economy heavily reliant on trade, and specifically on imports of energy and liquefied natural gas, Europe’s economic growth could decline from 1.6% to 0.4% if the conflict in the Middle East persists. [3] European exports could decrease by 0.6%, and import growth could fall to 0.3% in a high-energy-price scenario.

Multilateral System Remains Resilient

Despite the challenges, the WTO notes that approximately 72% of global trade continues to be conducted under the Most Favored Nation (MFN) principle, indicating that the multilateral trading system remains largely intact. [3] This percentage, down from around 80% early last year, suggests a degree of resilience in the face of escalating trade tensions.

Looking Ahead

The convergence of geopolitical instability in the Middle East and the imposition of new tariffs presents a complex challenge to the global economy. A swift resolution to the conflict and a recalibration of trade policies are crucial to mitigating the risks and fostering sustainable economic growth. The WTO Director-General has emphasized that an end to the war in the Middle East would be the most beneficial outcome for global trade and the economy. [3]