WTO warns US-China tensions could curb global growth

The World Trade Organization is facing the greatest crisis of its 23-year existence.

Rising trade tensions caused by President Donald Trump’s push to impose tariffs on imports from key US trading partners such as China and the EU may already be having an effect on the global economy, the World Trade Organization warned on Thursday.

President Donald Trump doesn’t believe the WTO can handle the problems created by China’s rapid economic ascent and is fundamentally challenging the rules that govern international trade. “The WTO is unfair to U.S.,” Trump said on Twitter.

In its latest forecast the WTO said it expected global trade volumes to expand by 4.4 per cent in 2018 after growing 4.7 per cent last year in the best performance seen in six years.

But the WTO also said it was detecting signs that rising trade tensions may already be having an impact on business confidence and investment decisions. It warned that any escalation in the sort of tit-for-tat tariff wars that the US and China have threatened in recent weeks would undermine the global recovery.

“A cycle of retaliation is the last thing the world economy needs,” said Roberto Azevêdo, the WTO’s director-general. And he said it would be better for countries to address their national security concerns at a political level, rather than testing the limits of the WTO system.

“National security is something that is not technical,” Azevedo said. “It is not something that will be solved by a dispute in the WTO. That requires conversation at the highest political level.”

The warning comes amid concerns that a brewing trade war between the US and China could derail the healthiest patch of growth in the global economy seen since the 2008 crisis.

The IMF, which in January forecast 3.9 per cent growth for the global economy this year, is expected to release its latest estimates at the fund and World Bank’s spring meetings in Washington next week. But officials have already begun to warn of the dangers a trade war would pose to growth and the system of global trade rules that has kept the peace for most of the past 70 years. These concerns are expected to dominate next week’s meetings.

Christine Lagarde, the IMF’s managing director, on Wednesday warned that “darker clouds” were looming over the global economy. “Governments need to steer clear of protectionism in all its forms,” she said in a speech in Hong Kong. “History shows that import restrictions hurt everyone.”

It took two decades for the WTO to complete its first significant trade accord and prospects for new deals among its 164 members are slim.

As a result, countries are pushing piecemeal accords centered on sectoral issues like e-commerce or investment. While that may be positive for groups of like-minded countries, it underlines the sense that the WTO’s broader negotiating agenda is mired in disagreement.