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World Trade Rebounds in First Half of 2017 but Risks Remain

Friday, September 22, 2017
Sandler, Travis & Rosenberg Trade Report

World Trade Organization economists have revised their estimate for global trade growth in 2017 from 2.4 percent to 3.6 percent following a 4.2 percent year-on-year increase from January through June. Trade growth is expected to slow to 3.2 percent in 2018.

The WTO attributes much of the increase so far this year to a resurgence of trade flows in Asia, where exports rose 7.3 percent and imports jumped 8.9 percent. Stronger growth in the U.S. and China has boosted demand for imports, which has spurred intra-Asian trade as that demand is transmitted through regional supply chains. Trade has also seen meaningful increases in North America (with import and export gains of 3.9 percent and 4.9 percent, respectively) and Europe (up 1.2 percent and 2.6 percent) but has been essentially flat in South America.

The fact that trade growth is “now more synchronized across regions than it has been for many years” could make the current expansion self-reinforcing, said WTO Director-General Roberto Azevêdo. Such an outcome “would be more likely if countries continue to resist the temptations of protectionism and work together … to ensure that gains from trade are both large and widely shared.”

At the same time, the WTO warned, there are still substantial risks that “could easily undermine any trade recovery.” The renegotiation of NAFTA and the uncertain nature of the future trade relationship between the European Union and the departing United Kingdom “could unsettle global and regional trade.” Protectionist rhetoric could translate into trade restrictions, increasing geopolitical tensions could have “extremely negative consequences for the world economy that would be difficult to gauge in advance,” and the cost of responding to natural disasters could have “a significant but temporary impact on trade.” In addition, monetary policy changes could provoke shifts in prices and exchange rates that would strongly influence trade patterns.

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