The revised projections come less than two weeks after President Trump called China a “threat to the world” and said there was little urgency for an interim trade agreement. On Sept. 20, he told reporters he was under no pressure to reach a deal with China before the 2020 election, despite his early insistence that China was eager to return to the negotiation table. Last month, Trump said the United States had reached a trade deal with Japan, although terms of the deal were scarce.
The year-long dispute between the United States and China has compelled American businesses to scale back investing amid the uncertainty wrought by Trump’s at-times-contradictory trade policies. He routinely points to a strong domestic economy as his best argument for reelection, but there have been signs of an economic slowdown. Wall Street is frequently jolted by Trump’s sudden pronouncements. Manufacturing is in a slump, and hiring cooled in August.
“The darkening outlook for trade is discouraging but not unexpected,” WTO Director-General Roberto Azevêdo said in a statement. “Beyond their direct effects, trade conflicts heighten uncertainty. … Job creation may also be hampered as firms employ fewer workers to produce goods and services for export.”
The WTO emphasized that the “high degree of uncertainty” surrounding global trade affects the organization’s projections. Figures could worsen if trade tensions escalate, or the numbers could improve if the sparring abates.
The WTO further warned that additional rounds of tariffs — and retaliation against those levies — “could produce a destructive cycle of recrimination.” Constantly shifting monetary and fiscal policy could destabilize volatile financial markets. A sharper slowdown of the global economy could produce an even larger downturn in trade. And complications from Brexit could have ripple effects throughout Europe, the WTO said.
Major economies around the world are either already in recession or on the brink of one. Many of the nations experiencing downturns also are highly dependent on selling goods overseas, which doesn’t bode well during a global trade war.
Germany, for example, is heavily reliant on manufacturing cars and other industrial goods, and its government has been reluctant to spend money to stimulate growth. Italy, the euro zone’s third-largest economy, entered a recession last year and has struggled from political crises that have hampered additional economic aid from the government. Mexico has been a target of Trump’s trade and immigration fights, and Brazil, the largest economy in South America, has struggled to sell goods overseas and is seeing slowed demand at home.
Britain also has seen an investment slump, largely because of uncertainty over Brexit. Many worry that the country will tip into a recession if it leaves the European Union without a deal. Britain’s possible departure from the bloc was thrust into further chaos last month when its highest court ruled that Prime Minister Boris Johnson’s recent decision to suspend Parliament was unlawful.
At the heart of the White House’s trade war with China are escalating tariffs placed on Chinese imports. The White House has imposed levies on more than $250 billion in Chinese goods, with higher tariffs set to go into effect before the end of the year. Despite the fact that the levies are causing costs to spike on a range of products, Trump claims that they are crucial to disrupting the Chinese supply chain and recalibrating the economic ties between Washington and Beijing.
“The multilateral trading system remains the most important global forum for settling differences and providing solutions for the challenges of the 21st-century global economy,” Azevêdo said.