Outlook for Global Commerce Darkens in New WTO Warning

(Bloomberg) --

The World Trade Organization just rang an alarm bell that global trade tensions are causing harm to the world economy in ways not seen since the financial crisis a decade ago.

In a new report, the WTO said a swirling storm of conflicts — including President Donald Trump’s fight with China, Britain’s forthcoming exit from the European Union or a host of regional skirmishes — are reducing the growth of international commerce.

It’s the third consecutive year that the Geneva-based WTO has lowered its expectations for global trade growth and broadly reflects similarly bleak views from the World Bank, the International Monetary Fund and the OECD.

The mood music from today’s report establishes a decidedly dark overtone as Chinese and U.S. trade negotiators prepare to meet again in Washington next week to resolve their nearly two-year conflict.

While there’s still time to resolve the world’s myriad trade squabbles, the WTO said any “further rounds of tariffs and retaliation could produce a destructive cycle of recrimination.”

This isn’t the first time the WTO has warned about the risk of increased trade tensions — but it may be one of the last time it will say so while its ability to mediate trade disputes is fully intact. Absent any surprise change of heart from the Trump administration, the WTO’s appellate body will be paralyzed in 10 weeks.

That could mean a return to an unconstrained environment of international trade conflicts which incoming EU trade commissioner Phil Hogan has likened to the “law of the jungle.”

Charting the Trade War

Outlook for Global Commerce Darkens in New WTO Warning

Today’s Must Reads

  • Russian protection | Putin’s strategy is a textbook case of how trade barriers backfire as debates intensify elsewhere about whether tariffs can fix economic imbalances.
  • Staying alive | American companies are grappling with how to change strategy in a U.S.-China trade war that shows no sign of abating, creating both winners and losers.
  • No help for Apple | Apple was denied relief for tariffs on five Chinese-made components for the upcoming Mac Pro computer, even after keeping some assembly operations in the U.S.
  • Tango time | The EU’s new trade chief vowed speedy solutions to transatlantic disputes that threaten to trigger a cycle of tariffs between America and Europe.
  • Industrial crisis | The global economy flashed louder warning signs as a wave of data showed manufacturing stuck in a slump, exports falling and sentiment sliding.

Economic Analysis

  • Dodging a downturn | Bloomberg Economics expects the euro area to avoid recession amid headwinds abroad.
  • Rough patch | South Korea’s export drag is likely to persist through year-end, requiring monetary stimulus.

Coming Up

  • Oct. 3: Australia trade balance
  • Oct. 10-11: U.S.-China talks in Washington

©2019 Bloomberg L.P.

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