The World Trade Organization said on Thursday that expansion in global trade could be seriously hurt by the increasing tensions between the U.S. and China. It is expected that global trade in 2018 would be lower than what is was last year.
Signs of a projected growth being potentially jeopardized and business confidence and investment decisions are being affected because of the looming global standoff, said the Geneva-based body.
The warnings echo the comments of Christine Lagarde of the International Monetary Fund who on Wednesday said that the global economy should save itself from being dragged into a whirlpool of protectionist policies. She said that the global trading system “is now in danger of being torn apart,” despite it being instrumental in reducing extreme poverty, reducing living costs and creating millions of high-paying jobs.
“This important progress could be quickly undermined if governments resort to restrictive trade policies, especially in a tit-for-tat process that could lead to an unmanageable escalation,” WTO Director-General Roberto Azevedo said in a prepared statement Thursday.
“It is not possible to accurately map out the effects of a major escalation, but clearly it could be serious,” Azevedo told a news conference in presenting the WTO report.
“Risks to the forecast are significant and they are predominantly on the downside”, Azevedo told the news conference and added that a trade war has not yet begun at least technically.
The confrontational approach of the U.S. president Donald Trump to trade and the Trump administration’s liking for imposing tariffs unilaterally instead of arriving at negotiated solution within WTO guidelines could make trade suffer.
“A cycle of retaliation is the last thing the world economy needs,” Azevedo said. “The pressing trade problems confronting WTO members is best tackled through collective action.”
From the peak of 4.7% in 2017, there could be a fall in trade growth to about 4.4% in 2018 and to a further 4% in 2019, according to a report by the WTO.
America’s allies and foes have been affected in similar manner by the levy of tariff on import of steel, aluminum, washing machines and solar products by Trump during the last three months.
In his latest rhetoric, warning of slapping tariffs on $150 billion worth of Chinese products was made by Trump as a retaliatory measure to theft of U.S. intellectual property and technology secrets by China.
There were retaliatory warnings by China of imposition of tariff on U.S. products imported into China worth about $50 billion and included products like soybeans, cars, and aircraft.
“The momentum is still there,” IMF Managing Director Lagarde had said during an April 11 interview. “We continue to be optimistic,” she said. “We have to secure that growth, we cannot let it to be wasted.”
“It took us ten years to get out of the financial crisis and we are now at the stage where our average growth around the world is close to what it was pre-financial crisis. Let us not rock that boat of growth,” she said
(Adapted from Bloomberg.com)

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