The global trading system faces unprecedented uncertainty and a potential contraction in the coming year, largely attributed to the protectionist policies championed by US President Donald Trump, according to Gabriel Felbermayr, Director of the Austrian Institute for Economic Research (WIFO). In an interview with the Bayern Media Group, Felbermayr stated that Trump’s actions have fundamentally altered the landscape for international trade, pushing trade policy uncertainty to “record highs.
While some initially feared implementations proved less drastic than initial pronouncements, Felbermayr argues that the US has demonstrably distanced itself from the established framework of rules-based global trade. He further suggests that Washington’s policies are inadvertently incentivizing other nations to adopt protectionist measures, driven by concerns about trade diversion and subsequent pressure to impose tariffs.
Felbermayr cautioned against characterizing Trump’s administration as having caused a universal slowdown in global commerce, acknowledging positive development through 2025. However, tangible signs of a deceleration in trade with the United States are already evident. German exports, a key indicator of European trade performance, plummeted by over eight percent in October 2025 compared to the previous year. Similarly, US imports from China have experienced a marked decline.
Critically, China has, until now, successfully mitigated some of these negative impacts by redirecting trade flows to alternative markets, acting as a stabilizing force within the global trading environment. Looking ahead, Felbermayr’s projections indicate a distinct possibility of stagnation, or even a slight contraction, in global trade for 2026, raising concerns about the long-term health and resilience of the international trading system and the potential ripple effects for global economic stability. The situation underscores the vulnerability of global trade to unilateral actions and calls into question the future of multilateral trade agreements.