The World Trade Organization sharply lowered its forecast for global trade growth in 2019. Pessimism is associated primarily with the uncertainty in the trade negotiations between China and the United States, as well as with the slowdown in global economic growth.
According to WTO forecasts, the growth rate of world trade will drop to a minimum in three years - 2.6% versus 3% a year earlier. The World Trade Organization has significantly reduced its current forecast compared to September. Then the WTO expected to see this figure at 3.7%. At the same time, the organization expects global trade growth to rise to 3% in 2020.
Forecast lowered amid growing trade tensions and increased economic uncertainty, the WTO report says. The actual growth of trade in 2018 also showed a disappointing result, having increased by only 3% against the forecast of 3.9%.
A sharp decline occurred in the fourth quarter, when global trade grew by 0.3%. In September, that is, at the end of the third quarter, the United States announced the introduction of regular duties against China.
Everything points to the continuing slowdown this year. Air cargo in January decreased by 3%, and in December the index of economic policy uncertainty peaked. At the end of the year, the work of the US government was suspended, and Sino-US relations remained uncertain.
Among the main negative factors affecting the slowdown in world trade, experts point out the introduction of new duties in the US and China, the slowdown in the global economy, the volatility of financial markets and the tightening of monetary conditions in developed countries. The world economy in 2019 will slow to 2.6% from 2.9% last year, the organization predicts.
In addition, the transformation of the Chinese economy affects global trade. China's GDP growth is associated less with production and more with consumption and development of the service sector, noted in the WTO.
At the same time, analysts have not yet taken to evaluate the effect of Brexit. Its consequences will depend on the final agreement between the UK and the European Union. However, it can be assumed that investment in the UK will decrease, which will lead to a drop in productivity.
Most experts predict now indicate a slowdown in US economic growth. Thus, the IMF expects US GDP growth at 2.5% in 2019 and only 1.8% in 2020.
The trade war between the USA and China was accompanied by an increase in import duties, firstly, from the American side and then from the Chinese one.
At the end of August last year, US$16 billion in American duties on Chinese goods came into effect at a tariff rate of 25%. At the same time, China responded to the United States with similar measures.
In September 2018, the United States introduced new trade duties. The tariff rate was 10% for Chinese goods worth $200 billion. China responded by imposing duties in the amount of 5 to 10% of goods from the United States in the amount of $60 billion.
The escalation of tariff barriers made it impossible to conduct business for many Chinese companies in the United States and vice versa. High tariffs have increased costs for suppliers, manufacturers, retailers and consumers, and this process continues to this day.
The International Monetary Fund predicted that in 2019 and 2020, the global economy will grow by about 3.5%.
But this year, the IMF expects that “70% of the global economy will survive a slowdown in growth”.
However, the IMF is not yet forecasting a recession and believes that in the second half of 2019 and in 2020 economic growth will accelerate.