Photo by WTO

JAKARTA (TheInsiderStories) – The World Trade Organization (WTO) predicted the trade tensions between the United States (US) and China, political risks and financial volatility will continue to put pressure on global trade. The trade weaknesses will expand into the first quarter (1Q) of 2019, told the official report released on Feb. 19.

In the latest quarterly outlook indicator from World Trade Outlook, the composite of the seven trading drivers was recorded at 96.3. This is the weakest point since March 2010 and a decline of 98.6 in November 2018. A figure below 100 is a signal for growth below the actual trend in the 1Q.

“The simultaneous decline in several indicators related to trade should make policy makers wary of a sharper slowdown if current trade tensions remain unresolved,” WTO said.

The organization further warned of the impact of US and Chinese trade war on global trade. The leading quarterly indicator of world trade in merchandise dropped to its lowest level in nine years. If trade tensions continue, a sharper slowdown will occur soon, said WTO.

“This ongoing loss of momentum highlights the urgency of reducing trade tensions, which together with political risks and persistent financial volatility can signal a broader economic slowdown,” said the report.

Quarterly indicators are calculated based on the trading volume of merchandise in the previous quarter, export orders, international air transport, container port output, production and sales of cars, electronic components, and agricultural raw materials.

While the index for export orders, international air transportation, production and sales of cars, electronic components, and agricultural raw materials showed the strongest deviation from the trend, approaching or exceeding previous lows since the financial crisis.

“The index for export orders (95.3), international air transport (96.8), car production and sales (92.5), electronic components (88.7) and agricultural raw materials (94.3) have shown the strongest deviations of trends, approaching or exceeding previous lows since the financial crisis,” said the WTO.

While, the index for container ports remains relatively mild at 100.3, but that may have been affected by loading before delivery before the anticipated increase in US-China rates.

Previously, the WTO has lowered its trade forecast in September amid rising trade disputes and tighter credit market conditions. But current trade growth has slowed to 3.7 percent from an estimated 3.9 percent in 2018, but “this estimate could be revised downward if trade conditions continue to deteriorate.

Meanwhile, the United Nations Conference on Trade and Development (UNCTAD) considers international trade tensions to increase next month if the US and China increase their tariff war, and this can have negative consequences for the world trade system.

A new seven round of US-China negotiations has take place in Washington since Tuesday, with a follow-up session at a higher level this weekend, after a round in Beijing last week. Therefore, the WTO said, however, greater certainty and improvement in the policy environment could trigger a rapid rebound in trade growth.

Designed to provide “real time” information about the trajectory of world trade relative to current trends, WTO is not intended as a short-term estimate, even though this shows future trade growth.

It aims is to identify turning points and measure momentum in the growth of global trade.

Written by Daniel Deha, Email: daniel@theinsiderstories.com