• HDFC
• 28 Sep 2018
• Knowledge Centre

HDFC, Tester

There will be a decline in global merchandise trade to 3.9% in 2018 vis-à-vis the previous year owing to escalating trade tensions between the US and China, according to the World Trade Organization (WTO).

 

According to the WTO, “Escalating trade tensions and tighter credit market conditions in important markets will slow trade growth for the rest of this year and in 2019. The new forecast for 2018 is below the WTO’s 12th April 2018 estimate of 4.4% but falls within the 3.1% to 5.5% growth range indicated at that time. A rise in actual and proposed trade measures targeting a variety of exports from large economies (the US, China, the European Union, Japan, and Canada, amongst others) caused uncertainty. Monetary policy tightening in developed economies has also contributed to volatility in exchange rates.”

 

Highlighting the reason for the downgrade, Mr. Roberto Azevedo, Director-General, WTO said, “The downgrade (from 4.2% to 3.9%) reflects the heightened tensions that we are seeing between major trading partners. Rising trade tensions pose the biggest risk to the forecast, but monetary policy tightening and associated financial volatility could also destabilize trade and output. More than ever, it is critical for governments to work through their differences and show restraint.”

 

A full-blown global trade war “would knock around 17% off global trade growth, and 1.9% off GDP growth,” he added.

 

The effect of this trade imbroglio on India is starting to show. Exports of steel items to the US fell 42% in the quarter ended June 2018, while its aluminum items exports to the US, facing similar sanctions, rose 59%, according to a report in a financial daily. India had put on hold tit-for-tat tariffs for the third time against 29 American products worth US$ 235 million by 45 days in September 2018.

 

The move was said to be made after the US unilaterally raised import duties on Indian steel and aluminium products.