WTO cuts forecasts for global trade as tensions mount

The World Trade Organization has lowered its growth forecasts for global trade, blaming the slowing economy and ongoing tensions between the US and China.

It also warned that a disorderly Brexit could see it reduce its forecasts even further.

The Geneva-based body said world merchandise trade volumes were expected to rise by 1.2% in 2019, notably slower than the 2.6% predicted in April. For 2020, volumes are now expected to grow by 2.7%, compared to an initial estimate of 3.0%.

The updated forecasts are based on consensus estimates of 2.3% growth in global GDP this year and the next, down from an earlier prediction of 2.6%.

The WTO said risks to the forecasts where “heavily weighted” to the downside: “Further rounds of tariffs and retaliation could produce a destructive cycle of recrimination. Shifting monetary and fiscal policy could destabilise volatile financial markets. A sharper slowing of the global economy could produce an even bigger downturn in trade.

“Finally, a disorderly Brexit could have a significant regional impact, mostly confined to Europe.”

“The darkening outlook for trade is discouraging, but not unexpected,” said director-general Roberto Azevêdo. “Beyond their direct effects, 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.”

The US and China have been locked in an increasingly bitter trade war for well over a year, with each country repeatedly upping tariffs and talks aimed at finding a resolution so far unsuccessful. US president Donald Trump believes China has an unfair advantage in global trade, and has been critical of the WTO.

Azevêdo argued that resolving trade disagreements was essential, however: “The multilateral trading system remains the most important global forum for settling differences and providing solutions for the challenges of the 21st century global economy.”