Trade growth slowdown likely to worsen amid tariff war, says WTO

Current Affairs

Rising trade tensions have prompted the World Trade Organization (WTO) to dim its prospect for trade growth in the second quarter of the 2019 calendar year.

“World trade growth is likely to remain weak into the second quarter of 2019,” the WTO said on Monday, pointing towards falling levels of growth in international air freight, automobile production, sales and trade in agriculture raw materials. “The outlook for trade could worsen if heightened trade tensions are not resolved or if macroeconomic policy fails to adjust to changing circumstances,” it further said.

While the WTO did not mention the US and China in its latest assessment, the escalating trade war between the two largest economies had been blamed by it earlier as a source of destabilisation of growth. The Geneva-based body brings out its quarterly forecast of global trade growth through the World Trade Outlook Indicator (WTOI) index. It shows a sustained slowdown in container port throughput, stemming from slow growth in crucial sectors.

The WTO has maintained that the index is not intended as a short-term forecast, suggesting it provides an indication of trade growth in the near future. The index had correctly forecast continued reduction in trade growth since 2018. Readings greater than 100 suggests growth above medium-term trends, while those below the number indicate the opposite. However, actual trade volumes have closely followed its predictions.


 This was driven by declines in all, but two component indices, electronic components and most importantly, export orders, which managed to rise slightly.graph Indices for export orders (96.6) and electronic components (96.7) appear to have bottomed out, even as both remained firmly below-trend, the WTO said. Elsewhere, the index for container port throughput (101.0) also declined but remained above 100, suggesting growth in line with recent trends.