Global trade is growing at the slowest pace since the financial crisis, with the WTO revising its forecast dramatically down for 2016.
World trade is now expected to grow at just below 1.7% this year, down from the 2.8% the WTO forecast in April. Falling import demand and slow economic growth in major economies such as Brazil, China and North America are to blame, according to the WTO, which has also revised down its forecast for next year.
For 2017, mindful of the volatility of the global economic picture, the WTO has been less exact with its forecast, predicting trade growth of between 1.8% and 3.1%, down from the 3.6% originally mooted.
This range forecast is based on a number of possible scenarios, including political machinations in important trading countries, potential longer-term impacts of the UK’s Brexit vote, and an increasingly uncertain relationship between trade and growth output.
Real GDP will grow by 2.2% this year, according to the same analysis, marking the first time in 15 years that the ratio of global trade growth to world GDP has fallen below 1:1. Trade growth has traditionally outstripped that of GDP by a factor of 1.5, while through the 1990s, it grew twice as quickly.
Data from the respected World Trade Monitor compiled by the CPB Netherlands Bureau for Economic Policy Analysis, also released in the past week, shows that in July, world trade fell by 1.1% from June, following a surprise 0.8% pickup the previous month. This was greater than the CPB’s expected 0.7% fall.
With anti-trade and anti-globalisation rhetoric emanating from the US election campaign reaching deafening levels, fears are mounting that both global trade and GDP growth could be dragged into the red in 2017.
Republican presidential nominee Donald Trump has vowed to slap a 40% tariff on imports to the US from China, amid accusations of currency manipulation. Trump and many in the US blame the decline in US manufacturing on China’s ascendency to the WTO in 2001.
This, according to Kevin Lai, a leading Hong Kong-based economist for Daiwa Securities, would cost China almost 5% of its GDP, GTR reported earlier this month.
The WTO’s director general Roberto Azevêdo, however, has called the slump in global trade growth a “wake-up call” that is particularly concerning amid the anti-globalisation sentiment. He has called on politicians not to opt for “misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth”.
He says: “While the benefits of trade are clear, it is also clear that they need to be shared more widely. We should seek to build a more inclusive trading system that goes further to support poorer countries to take part and benefit, as well as entrepreneurs, small companies, and marginalised groups in all economies. This is a moment to heed the lessons of history and re-commit to openness in trade, which can help to spur economic growth.”
You can view the full WTO trade statistics here.