The World Trade Organization just released its annual crystal ball consultation, projecting that AI will boost global trade by nearly 40% by 2040. We've heard this song before from McKinsey, which estimated that generative AI could provide the global economy with an annual productivity boost of 0.5 to 3.4 percent from 2023 to 2040, depending on adoption rates. But here's the thing about grand economic projections from international bodies: they have a curious habit of assuming away the messy realities of politics, power, and actual human behavior.
The WTO's rosy forecast arrives at a particularly ironic moment. While Deputy Director General Johanna Hill celebrates AI as a "bright spot for trade in an increasingly complex trading environment," the same organization just warned that global trade outlook for 2025 has "deteriorated sharply" due to actual trade policies currently in effect. Based on the tariffs currently in place, the volume of world merchandise trade is now expected to decline by 0.2% in 2025. So we're supposed to believe that AI will save global trade while trade itself is actively shrinking due to very real, very immediate policy decisions.
Let's examine what's actually happening in 2025 while the WTO dreams of its AI-powered future. All 2025 tariffs implemented to date imply real GDP growth that is -0.9pp lower in calendar year 2025, while the level of real GDP is persistently -0.6% smaller in the long run, according to Yale's Budget Lab analysis. Global trade is severely affected by the tariffs, with trade flows contracting by between 5.5% and 8.5% relative to the pre-shock economy, finds research from CEPR.
Meanwhile, more than 30 percent of surveyed firms identify trade and tariffs as their most pressing business concern, up sharply from just 8.3 percent in the previous quarter, according to the Richmond Fed's CFO Survey. This isn't theoretical disruption—this is companies actively restructuring operations, rethinking supply chains, and burning cash on compliance costs right now.
The human element consistently confounds these techno-optimistic projections. While the WTO enthuses about AI reducing communication barriers and logistics costs, Trump's tariffs (April 8, 2025) would reduce GDP by about 8% and wages by 7%, with a middle-income household facing a $58K lifetime loss, according to Penn Wharton's modeling. These aren't abstract numbers—they represent real families making real decisions about spending, saving, and economic behavior that no AI translation tool can overcome.
The WTO suggests AI could particularly benefit developing countries by improving digital infrastructure and enabling small producers to access global markets. This reads like pure fantasy when you consider the actual mechanics of AI deployment and international trade. Leading AI countries could capture an additional 20 to 25 percent in net economic benefits, compared with today, while developing countries might capture only about 5 to 15 percent, McKinsey's research shows.
AI infrastructure requires massive capital investment, stable electricity grids, educated workforces, and regulatory frameworks—precisely the advantages that already separate developed from developing economies. The notion that AI will somehow leapfrog these fundamental disparities reveals a techno-solutionist mindset that ignores basic economics.
Economic models, whether from the WTO or McKinsey, share a fatal flaw: they assume rational actors operating in stable institutional environments. They project smooth adoption curves and efficient resource allocation. They don't account for trade wars, regulatory capture, or the simple human tendency to make decisions based on politics rather than optimization.
The WTO's 16-year timeline conveniently extends beyond any current policymaker's term, allowing them to make grand claims without accountability. By 2040, the officials making today's projections will be retired, replaced by a new generation who can issue their own equally optimistic reports about quantum computing or whatever the next technological panacea happens to be.
We're living through a moment when established international institutions are desperately searching for relevance while their core mission—facilitating free trade—faces existential political challenges. The WTO's AI enthusiasm reads less like serious economic analysis and more like institutional marketing designed to remind the world why we need global trade bodies in the first place.
The real question isn't whether AI will boost global trade by 40%. The real question is whether global trade institutions will exist in their current form long enough to find out.
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