The World Trade Organization (WTO) has reported a significant slowdown in global services trade growth, which dropped to 5% year-on-year in the first quarter of 2025, a stark contrast to the robust 10% growth recorded in 2024 and 2023. This deceleration, detailed in the WTO’s “Global Trade Outlook and Statistics” report released on July 31, 2025, reflects mounting economic uncertainties and the impact of a strong US dollar. Despite the global downturn, Asian economies, including India, China, and Japan, have demonstrated resilience with double-digit export growth, particularly in computer services. This article delves into the factors driving the slowdown, regional performance, and the implications for the global economy.
Factors Behind the Slowdown
The WTO attributes the slowdown in global services trade to two primary factors: the appreciation of the US dollar against major currencies like the euro and increased economic uncertainty. The strong dollar has made services priced in US dollars more expensive for international buyers, dampening demand in key markets. Additionally, geopolitical tensions and trade policy uncertainties, including the looming threat of US tariffs, have created a cautious environment for global trade. These factors have particularly impacted Europe and North America, where services exports grew by only 3% in Q1 2025, down from 8% and 11% respectively in Q1 2024.
The category of “Other commercial services,” which includes financial, professional, and digitally deliverable services and accounts for approximately 60% of global services trade, was the primary driver of the slowdown. Growth in subsectors such as professional, technical, and research and development services moderated significantly compared to the previous year. Meanwhile, global transport exports grew by 3%, supported by a surge in demand for goods in regions like South and Central America and the Caribbean, where shipping services payments increased by 19%. International travel also expanded by 5%, surpassing pre-pandemic levels for the first time, with international tourist arrivals 3% above 2019 figures, according to UN Tourism data.
Asian Economies Buck the Trend
Despite the global slowdown, Asian economies have shown remarkable resilience. The region sustained a 9% growth in services exports, driven by strong performances in China (13%), India (12%), and Japan (11%). India’s computer services exports, in particular, grew by 13%, fueled by global demand for artificial intelligence (AI), digital transformation, and cybersecurity solutions. This momentum is expected to continue as businesses worldwide adapt to new technologies and consumers increasingly prefer digital services. Ireland also recorded a notable 9% increase in computer services exports, underscoring the sector’s relative immunity to the broader slowdown.
The strength of Asian economies highlights their growing role in the global services trade. China’s robust export growth through June 2025, alongside India’s and Japan’s double-digit gains, contrasts sharply with the sluggish performance in Western markets. This divergence reflects Asia’s competitive advantages, including a skilled workforce, technological advancements, and favorable trade policies that have bolstered sectors like IT and digital services.
Regional Disparities in Services Trade
The WTO report reveals stark regional disparities in services trade performance. In North America, the United States saw a modest 5% increase in services exports, while Canada experienced a 6% decline. The European Union’s services exports to non-member countries grew by 3%, but imports from outside the EU rose more sharply at 6%. The United Kingdom stood out with a 9% increase in exports and a 13% rise in imports, indicating strong trade activity despite the global slowdown.
In contrast, regions like Africa and South and Central America and the Caribbean are projected to face declines in services exports in 2025, with the Middle East expected to see modest growth of 1.7% in 2025 and 1.0% in 2026. The Commonwealth of Independent States (CIS) anticipates growth of 1.1% in 2025 and 3.5% in 2026, reflecting a mixed outlook for developing regions.
Computer Services: A Bright Spot
The computer services sector has emerged as a bright spot amid the broader slowdown. Strong global demand for AI, digital transformation, and cybersecurity solutions has sustained growth in this area, with India and Ireland leading the charge. The WTO notes that this momentum is likely to persist, driven by businesses’ ongoing adaptation to new technologies and rising consumer preferences for digital services. This resilience underscores the increasing importance of digital trade in the global economy, even as other sectors face challenges.
Broader Economic Implications
The slowdown in services trade is part of a larger narrative of global trade challenges. The WTO’s April 2025 “Global Trade Outlook and Statistics” report projects a 0.2% decline in global merchandise trade for 2025, a sharp reversal from the 2.9% growth in 2024. This decline, driven by a surge in US tariffs and trade policy uncertainty, is expected to indirectly impact services trade by weakening demand for related services like transport and logistics. The WTO forecasts services trade growth of 4.0% in 2025 and 4.1% in 2026, well below earlier projections of 5.1% and 4.8%, respectively.
The United Nations Conference on Trade and Development (UNCTAD) further warns of a potential global economic growth slowdown to 2.3% in 2025, signaling a recessionary trend, particularly for developing countries. The combination of tariff-induced disruptions, geoeconomic tensions, and protectionist policies poses significant risks to global trade and economic stability.
India’s Position in Global Trade
India remains a key player in global services trade, despite the broader slowdown. In 2024, India ranked 6th among commercial services exporters (excluding intra-EU trade), with a 5.3% share of global services trade, slightly down from 5.4% the previous year. Its services imports also ranked 6th, with a 4.1% share. India’s strong performance in computer services and its growing role in digital trade position it well to capitalize on global demand for technology-driven services, even as merchandise trade faces challenges.
Looking Ahead
The WTO’s report highlights significant downside risks for global services trade, including the potential reimposition of US “reciprocal tariffs” and broader trade policy uncertainty, which could further dampen growth. If these risks materialize, global merchandise trade could decline by 1.5% in 2025, with ripple effects on services trade. WTO Director-General Ngozi Okonjo-Iweala has expressed concern over the uncertainty surrounding trade policy, particularly the US-China trade standoff, emphasizing the need for multilateral cooperation to foster a resilient global economy.
For India and other Asian economies, continued investment in technology and digital infrastructure will be critical to sustaining their competitive edge. Policymakers must balance the use of tariffs to protect domestic industries with the need for trade liberalization to integrate into the global economy. As global trade faces headwinds, fostering regional and international policy coordination will be essential to mitigate disruptions and strengthen economic resilience.
