London
CNN
—
President Donald Trump’s global trade war will hurt economies around the world this year, including the US, according to a new report by The World Trade Organization.
The WTO projects global economies will grow more slowly than they would without tariffs — and that will be especially the case in North America, a region dominated by the United States, which will see a greater slowdown than other areas.
A battery of new tariffs imposed by Trump and retaliated against by other nations mean global trade prospects have “deteriorated sharply,” the WTO report read. Total global trade will now shrink 0.2%, the organization expects, compared to a 2.7% growth forecast without tariffs.
The global economy and, by extension, people’s pocketbooks are very much connected to the trade in goods and services between countries. A shrinking economy typically means fewer (and lower-paid) jobs, financial difficulties for ordinary people and hard decisions about spending by companies and governments.
The WTO said it expects global economic output to grow by 2.2% this year. That increase would be 0.6 percentage points lower than the rate the WTO would expect in a scenario with no additional tariffs.
In North America economic output is expected to be 1.6 percentage points below what it would be otherwise.
Kristalina Georgieva, the head of the International Monetary Fund, wrote last year that more than a billion people rose from extreme poverty over the past 40 years, as global trade surged.
If Trump goes ahead and unleashes his so-called “reciprocal tariffs” on the US’ trading partners following the 90-day pause on those levies he announced last week, that — combined with general uncertainty about trade policy — will see the volume of traded goods contract by a much sharper 1.5% worldwide this year, the WTO predicted.
Trump has, however, excluded one nation from that pause. China is now subject to a 125% reciprocal tariff on its goods exported to America, adding to the 20% across-the-board tariff that Trump recently imposed on its products.
One consequence, according to the WTO, is that China may redirect products destined for the US to other countries. It expects Chinese goods exports to rise by between 4% and 9% across all regions outside North America this year, which could increase competition in those markets.
Uncertainties around global trade tend to weigh on the global economy, the WTO argued in its report.
“When uncertainty around future tariffs or trade relations increases, firms may delay or scale back investments. This, in turn, reduces trade flows… and ultimately (helps lower) economic growth.”
