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Tariffs and Trade War Drag Down Flow of Global Merchandise: WTO

World merchandise trade is expected to remain below trend in the third and fourth quarters, according to the World Trade Organization’s (WTO) latest Goods Trade Barometer.

The indicator’s reading of 96.6 marks a slight improvement compared to the 95.7 registered in August. Like its counterpart for services, the Goods Trade Barometer aims to gauge momentum and identify turning points in global trade growth. Readings of 100 indicate growth in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend growth.

The Goods Trade Barometer provides “real time” information on the trajectory of world merchandise trade volumes relative to recent trends. Some components of the barometer have stabilized since the last reading in August, while others remain on a downward trajectory, reflecting heightened trade-war tensions between the U.S. and China and rising tariffs in key sectors, including apparel and footwear, the WTO noted.

Indices for export orders (97.5), automotive products (99.8) and container shipping (100.8) have firmed up into on-trend territory. However, the indices for international air freight (93), electronic components (88.2) and raw materials (91.4) have all deteriorated further below trend. Electronic components trade was weakest of all, possibly reflecting recent tariff hikes affecting the sector, the WTO said.

The data confirms a loss of momentum in goods trade indicated by the Goods Trade Barometer earlier this year. According to the latest WTO quarterly trade volume statistics, merchandise trade rose just 0.2 percent year-on-year in the second quarter of 2019, compared with 3.5 percent in the same quarter of last year.

In September, WTO economists downgraded their trade growth expectations for 2019 to 1.2 percent, down from the 2.6 percent forecast in April. They attributed this substantial decline to slowing economic growth, increased tariffs, Brexit-related uncertainty and the shifting monetary policy stance in developed economies.