The global export and import of goods is now expected to increase by 3.9 per cent this year, down from the WTO's April forecast of 4.4 per cent.
Next year's growth rate projection was lowered from 4 to 3.7 per cent.
"While trade growth remains strong, this downgrade reflects the heightened tensions that we are seeing between major trading partners," WTO Director General Roberto Azevedo said.
Global trade tensions have escalated in recent months, with the US imposing high tariffs on steel and aluminium imports while also targeting 250 billion dollars' worth of Chinese imports. China and the European Union have reacted with retaliatory measures.
In April, the WTO had warned that this escalation could hurt otherwise strong growth.
Although the tariffs have had little direct effect so far, they have created uncertainties that may already have led to lower investments, the WTO said Thursday.
"More than ever, it is critical for governments to work through their differences and show restraint," Azevedo added.
The WTO said tariffs are only one of several risks to global trade. Interest rate increases in developed countries could drain capital from developing and emerging economies while commodity supplies could be threatened by geopolitical tensions, the WTO said.
The WTO also warned that China's economic shift from investment towards domestic consumption may affect global trade, as Chinese investments rely heavily on imports.
"Overall, risks to the forecast are considerable and heavily weighted to the downside," the WTO concluded.