Rising trade tensions and economic uncertainty account largely for the deceleration in global trade growth experienced in 2018 and will continue to pose the greatest risk to growth in 2019. This is according to the World Trade Organization (WTO) in its latest Trade Statistics and Outlook released on April 2, 2019.
As I had noted in my first blog post for the year, 2018 was without doubt a challenging year for global trade policy. Among the highlights (or low lights) were the tariff tit for tat between the US and China until a truce in December 2018 brought a halt to the planned imposition of more tariffs, and the imposition by the US of punitive tariffs on steel and aluminium imports, which led to retaliation by other major powers, most notably, the EU.
It is little surprise then that according to WTO economists, global trade under-performed in 2018 expanding by 3.0%, down from the 4.6% above-average growth recorded in 2017 and slower than the 3.9% which was projected for 2018 in their September 2018 forecast. The uncertainty has led to a dampening of investment and consumption. Weak import demand in Europe and Asia depressed global trade volume growth in 2018. Higher energy prices were partly responsible for the 10% increase in the value of merchandise trade in 2018.
In his brief remarks during a press conference on the latest forecast, the WTO’s Director General, Mr. Roberto Azevedo, noted that “the fact that we don’t have great news today should surprise no one who has been reading the papers over the last 12 months. Of course there are other elements at play, but rising trade tensions are the major factor”. The Director General further explained that the range of new and retaliatory measures tariffs introduced affected widely trade goods. Other factors which affected global trade growth in 2018 were the weaker global economic growth, volatility in financial markets and tighter monetary conditions in developed countries, among others.
World commercial services trade was much more positive with the value rising 8% in 2018 on the back of strong import growth in Asia.
Looking forward, WTO economists now forecast world merchandise trade growth to slow further to 2.6% in 2019, which is a downward revision from their forecast of 3.7% in September 2018. WTO economists estimate some pickup in trade growth to 3.0% in 2020, with stronger growth predicted for developing economies than developed ones.
They, however, caution that this forecast could be affected negatively if trade tensions continue to escalate, or positively if they ease. Director General Azevedo reiterated that “it is therefore increasingly urgent that we resolve tensions and focus on charting a positive path forward for global trade which responds to the real challenges in today’s economy”.
Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.