The World Trade Organization has sharply lowered its forecast of trade growth to 1.2% for 2019 from 2.6%, expected so far.
The tumble is severe. The World Trade Organization (WTO) lowered Tuesday 1st October, its forecast growth in world merchandise trade to 1.2% in 2019, against 2.6% expected so far. For the year 2020, the WTO remains optimistic, its forecasts only slightly revised down to 2.7%, against 3% previously.
It is in North America and Asia, two regions affected by the trade war between China and the United States, that the fall is the most spectacular. The growth rate of foreign trade could fall in North America from 4.3% in 2018 to 1.5% in 2019 and from 3.8% to 1.8% in Asia. Trade in services, which is harder to measure, has started to stagnate. "Global trade is heading for zero growth," predicts Sébastien Jean, director of the Center for Prospective Studies and International Information (Cepii).
The WTO invokes the slowing of global growth and trade tensions to justify these new forecasts. In 2019, the United States continued to increase its tariffs on a portion of Chinese imports, mainly intermediate goods, and threatened to extend them to all imports by the end of the year. These tensions undermine the confidence of companies, which prefer to postpone their investments. The WTO measures the rise of uncertainty in two ways. First using the Global Economic Policy Uncertainty Index, which calculates the frequency of uncertainty keywords in reports and studies published around the world. It has tripled in one year.
The organization also takes into account the business confidence index for new export orders. This index, measured by IHS Markit, has fallen since 2018 and is at its 2012 level, the dark year of the sovereign debt crisis. These uncertainties could even go up a notch if a new trade battle breaks out between the United States and the European Union. An imminent decision by the WTO must fix the amount of trade sanctions that the United States will be able to apply to European companies in the old conflict between Boeing and Airbus, the two groups accusing each other of benefiting from illegal subsidies. Brussels, which says it favors an amicable settlement, has warned that it will retaliate.