The WTO had in April projected a 2.6% rise in volume of merchandise trade for 2019.
The World Trade Organization (WTO) on Tuesday trimmed by more than a half its 2019 global trade growth forecast to just 1.2%, the lowest in a decade, and cautioned that further rounds of tariffs in the current environment of heightened uncertainty may result in a “destructive cycle of recrimination.”
The WTO had in April projected a 2.6% rise in volume of merchandise trade for 2019. On Tuesday, it also cut its forecast for 2020 to 2.7% from 3% predicted in April. World merchandise trade volume grew 3% in 2018.
The sharp downward revision underscores the risks facing international trade, amid an escalating trade war between the US and China. Washington has threatened more tariffs on Chinese imports and is gearing up for new levies on goods from the EU. “The darkening outlook for trade is discouraging but not unexpected,” WTO director-general Roberto Azevedo said. “Trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards.”
“Job creation may also be hampered as firms employ fewer workers to produce goods and services for export,” Azevedo said.
The multilateral body said the sharp cut in outlook factors in expected slower expansion of the global economy, partly because of trade tussles, but also due to cyclical and structural factors and, in Europe, Brexit-related uncertainty.
It offered a forecast range for 2019 trade growth of 0.5% to 1.6% and for 2020 of 1.7% to 3.7%, with the upper end of the ranges achievable if trade tensions de-escalated. However, it stressed: “Risks to the forecast are heavily weighted to the downside and dominated by trade policy.”
The trade war has caused economic growth to dip to levels not witnessed since the financial crisis. The tit-for-tat tariffs between the US and China have continued to weigh on global economic growth. China’s vice-premier Liu He is scheduled to visit Washington to meet with his US counterparts soon. The US is set to impose extra tariffs on some more Chinese goods on October 15.
According to a Bloomberg report, US President Trump may soon slap new tariffs on as much as $8 billion worth of European goods stemming from a 15-year-old dispute over illegal state aid provided to aircraft maker Airbus SE. The European Commission is mulling a plan to immediately retaliate with tariffs on more than $4 billion worth of US exports, citing as justification a WTO dispute over prohibited subsidies from two decades ago, the report added.