The US' steep tariffs on China "could open the door" for some least-developed countries (LDCs) to increase fashion exports to the US market, according to a new report.

The World Trade Organization’s (WTO) ‘Global Trade Outlook and Statistics’ report explains the disruption in US-China trade is expected to trigger significant trade diversion, raising concerns among third markets about increased competition from China. For example, Chinese merchandise exports are projected to rise by 4% to 9% across all regions outside North America as trade is redirected.

Opportunity for smaller fashion sourcing countries to grow market share

It adds that US fashion and textile imports from China are expected to fall sharply which could create “new export opportunities for other suppliers able to fill the gap”. More specifically, it highlights that least-developed countries, could take advantage to grow their fashion export market share to the US.

However, the report points out the outlook for global trade overall has deteriorated sharply due to a surge in tariffs and trade policy uncertainty (TPU).

It reads: “Based on measures in place as of 14 April, including the suspension of ‘reciprocal tariffs’ by the United States, the volume of world merchandise trade is now expected to decline by 0.2% in 2025 before posting a modest recovery of 2.5% in 2026.”

The WTO notes the new estimate for 2025 is nearly three percentage points lower than it would have been without recent policy shifts, and marks a significant reversal from the start of the year, when its economists expected to see continued trade
expansion supported by improving macroeconomic conditions.

The risks to the forecast include the implementation of the currently suspended reciprocal tariffs by the United States, as well as a broader spillover of trade policy uncertainty beyond US-linked trade relationships.

If enacted, the WTO believes reciprocal tariffs could reduce world merchandise trade growth by an additional 0.6 percentage points, posing particular risks for least-developed countries (LDCs), which are traditionally where the world’s leading fashion manufacturing hubs are based, while a spreading of TPU could shave off a further 0.8 percentage points.

“Taken together, the reciprocal tariffs and spreading TPU would lead to a 1.5% decline in world merchandise trade volume in 2025,” it says.

Impact of recent trade policy changes by region

The WTO admits the impact of recent trade policy changes varies sharply across regions.

In the adjusted forecast, North America now subtracts 1.7 percentage points from global merchandise trade growth in 2025, turning the overall figure negative.

Asia and Europe continue to contribute positively but less than in the baseline scenario, with Asia’s contribution halved to 0.6 percentage points.

The combined contribution of other regions – Africa, the Commonwealth of Independent States (CIS), including certain associate and former member states, the Middle East, and South and Central America and the Caribbean – also declines but remains positive.

WTO economists expect world GDP at market exchange rates to grow by 2.2% in 2025 – 0.6 percentage points below the no-tariff-change baseline – before slightly recovering to 2.4% in 2026.

Tariff changes are forecast to have the largest impact on North America (-1.6 percentage points), followed by Asia (-0.4 points) and South and Central America and the Caribbean (-0.2 points).

Reciprocal tariffs would have a limited effect on the global figure, however a wider spread of trade policy uncertainty could nearly double the GDP loss to 1.3 percentage points relative to the baseline.

Global trade outlook for 2025

The WTO adds that the recent downturn in trade prospects follows a strong 2024 performance, when the volume of world merchandise trade grew by 2.9% and commercial services trade expanded by 6.8%.

With global GDP rising by 2.8% at market exchange rates, it was the first year since 2017 – excluding the post-pandemic rebound – where merchandise trade growth outpaced output.

In value terms, world merchandise exports increased by 2% to $24.43tn, indicating a decline in average export and import prices. Commercial services exports rose by 9% to $8.69tn, reflecting strong demand across a range of sectors.

Overall impact for leading fashion sourcing countries

Least developed countries, which include fashion sourcing hubs Bangladesh, Cambodia, Haiti, Myanmar and Ethiopia are at particular risk if US President Trump reinstates the currently suspended “reciprocal tariffs”.

The WTO explains: “If enacted, reciprocal tariffs would reduce global merchandise trade volume growth by 0.6 percentage points in 2025 while spreading trade policy uncertainty could shave off another 0.8 percentage points.

“Together, reciprocal tariffs and spreading trade policy uncertainty would lead to a 1.5% decline in world merchandise trade in 2025.”

The report explains that least-developed countries (LDCs) are normally among the most vulnerable to external economic shocks due to the fact that their trade is often
concentrated in a small number of products and because they have limited resources to deal with setbacks.

Bangladesh is a prime example of this as it is the world’s second largest exporter of garments (sitting only behind China) and its economy relies heavily on the success of its garment industry.

Before Trump announced a 90-day pause on reciprocal tariffs Bangladesh’s interim leader Muhammad Yunus urged the US to postpone its 37% tariff on all US-bound goods for three months in the hope of “smoothly implementing an initiative to substantially increase US exports to Bangladesh”.

Counterintuitively, the report says the recent rise in tariffs and uncertainty is projected to have a positive impact on merchandise trade flows of LDCs in 2025, with export volume growth rising to 4.8% in the adjusted forecast from 3.5% in the baseline forecast.

Import growth should also increase to 7.6% in the adjusted forecast from 7.0% in the baseline, while the change in GDP of LDCs should be negligible. The reason for the stronger export growth is that many LDCs have an export structure similar to China’s, particularly in textiles and electronics, which will allow them to benefit from trade diversion as Chinese goods face higher tariffs.

However, it should be noted that if Trump pursues his reciprocal tariff plan after the 90-day pause, many of the leading fashion sourcing countries will be hit by much higher tariff rates. Vietnam and Cambodia would face tariffs of 46% and 49% respectively, Bangladesh would face a 37% tariff, India would be hit by a 26% rate, Thailand 36% and Myanmar (which was recently hit by a 7.7-magnitude earthquake) would be subject to a 49% tariff increase.

By Just Style