World Trade Organisation (WTO) cautioned on Monday that pressure on global trade will increase as a result of rising trade tensions, political risks and financial volatility, and trade weakness is likely to extend into the first quarter of 2019.
The oganisation’s latest World Trade Outlook Indicator (WTOI) is the weakest since March 2010 and signals below-trend trade expansion into the first quarter.
“The simultaneous decline of several trade-related indicators should put policy makers on guard for a sharper slowdown should the current trade tensions remain unresolved,” WTO said.
It added that the sustained loss of momentum highlights the urgency of reducing trade tensions, which together with continued political risks and financial volatility could foreshadow a broader economic downturn.
The quarterly indicator is based on world merchandise trade volume, export orders, air freight, container throughput, automobile production, electronic components and agricultural raw materials.
According to the global trade organisation, indices for export orders, international air freight, automobile production and sales, electronic components and agricultural raw materials have shown the strongest deviations from trend, approaching or surpassing previous lows since the financial crisis.
The index for container port throughput remained relatively buoyant, but that may have been influenced by a front-loading of shipments before an anticipated hike in U.S.-China tariffs.
The weakness in the overall index is said to have been driven by steep declines in the component indices, which appear to be under pressure from heightened trade tensions.
The indicator analysis shows that temporary factors may have influenced some of the indices. Front-loading of imports ahead of anticipated US-China tariffs may have sustained container shipping to some extent, while technical problems in the German automotive sector may have contributed to weakness in automobile production and sales.
The WTO downgraded its trade forecast last September amid escalating trade disputes and tighter credit market conditions.
Trade growth is currently forecast to slow to 3.7 per cent in 2019 from 3.9 per cent in 2018, but these estimates could be revised downward if trade conditions continue to deteriorate.
Nevertheless, WTO says, greater certainty and improvement in the policy environment could bring about a swift rebound in trade growth.