The World Trade Organization is claiming global trade has lost its momentum amid trade tensions between nations and economic uncertainty.
WTO economists expect merchandise trade volume growth to fall to 2.6% in 2019 — down from 3.0% in 2018, according to a report by the WTO. Trade growth could then rebound to 3.0% in 2020, however, this is dependent on an easing of trade tensions.
“With trade tensions running high, no one should be surprised by this outlook. Trade cannot play its full role in driving growth when we see such high levels of uncertainty. It is 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 – such as the technological revolution and the imperative of creating jobs and boosting development,” said WTO director-general Roberto Azevedo.
Azevedo said the WTO is working on easing tensions and are looking at ways to strengthen and safeguard the trading system.
Several factors weighed down trade growth in 2018, including new tariffs and retaliatory measures, weaker global economic growth, volatility in financial markets, and tighter monetary conditions in developed countries.
Consensus estimates have world GDP growth slowing from 2.9% in 2018 to 2.6% in both 2019 and 2020, according to the WTO.
In 2017, trade growth reached above-average levels with a growth of 4.6%. This suggests that trade could “recover some of its earlier dynamism, but this has not materialized.”
The WTO estimates world trade growth will fall to 3.0% from the last September’s forecast of 3.9% due to fourth quarter results that showed a decline in exports and imports by 0.3%. Prior to the drop, the third quarter showed trade was up by 3.8% which was in line with WTO projections.
In 2018, world merchandise exports totalled US$19.48 trillion, an increase of 10% from the previous year. The increase was driven by higher oil prices, which increased by about 20% between 2017 and 2018. Commercial services exports totalled US$5.80 trillion in 2018, up 18% from the previous year.
“If current GDP forecasts are realized, the WTO expects the volume of world merchandise trade to grow by 2.6% in 2019, with stronger expansion in developing economies (3.4% for exports, 3.6% for imports) than in developed ones (2.1% for exports, 1.9% for imports). World trade growth should pick up slightly in 2020 to 3.0%, with growth in developing economies (3.7% for exports, 3.9% for imports) again outpacing developed countries (2.5% for exports, 1.9% for imports),” read the WTO report.