The U.S. aggressive trade policy could shrink international trade by 17 percent and global GDP to fall by 2 percent by 2022.
The global Gross Domestic Product (GDP) growth rate will decrease from 2.9 percent in 2018 to 2.6 percent in 2019 and 2020, due to the U.S. President Donald Trump's Trade war against China and the doubts generated by the Brexit, the World Trade Organization (WTO) said Thursday.
"Given that trade tensions are rising, no one should be surprised by these prospects," Roberto Azevedo, WTO Director General, said and added that "if we forget the fundamental importance of the rules-based trading system, we run the risk of weakening it, which would be a historical error that would affect employment, growth and stability throughout the world."
The WTO forecast reflects downgraded GDP projections for North America, Europe and Asia, mostly due to macroeconomic considerations including the U.S. fiscal policy, the phase-out of monetary stimulus in the Euro area and the economic rebalancing of the Chinese economy away from manufacturing and investment and towards services and consumption.
The economic slowdown will affect more the developed countries, whose exports will increase by 2.1 percent in 2019 and 2.5 percent in 2020. In contrast, developing countries' exports will grow to 3.4 percent in 2019 and 3.7 percent in 2020, mostly due to the demand stemming from China, India and Brazil. However, Latin American exports will grow by only 0.7 percent in 2019 and one percent in 2020.
The WTO considers it difficult to quantify the effects of the U.S trade against China on global trade. In the worst case scenarios, however, the U.S. trade policy could cause global GDP to fall by two percent and international trade to shrink by 17 percent by 2022.
This scenario would have worse consequences than those brought about by the 2008 financial crisis, which caused a world trade contraction of 12 percent and a world GDP reduction of two percent in 2009.
"In this war there would not be a winner and a loser, but many losers; everyone would be harmed by a brake on global trade," Azevedo said and stressed that the WTO will not interfere in the talks between the United States and China.
In 2018, the world's largest importer was the United States (US$2.61 billion), followed by China (US$2.13 billion), Germany (US$1.28 billion) and Japan (US$749 billion). In that same year, however, China was the world's largest exporter (US$2.48 billion), followed by the U.S. (US$1.66 billion), Germany (US$1.56 billion) and Japan (US$738 billion).