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WTO forecasts rebound in global trade but keeps geopolitical risks in focus

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6 months ago

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Container ships from international trunk lines, including those from Europe, Africa, India, Pakistan, and Southeast Asia, are loading and unloading containers at the container terminal of the Qianwan Port Area of Qingdao Port in Qingdao, China, on April 4, 2024. 

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The World Trade Organization on Wednesday said that it expects global trade to rebound gradually this year, before rising further in 2025, as the impacts of higher inflation fall into the rearview mirror.

In its latest “Global Trade Outlook and Statistics” report, the WTO forecast that total global trade volumes will increase by 2.6% in 2024, and by a further 3.3% in 2025. It follows a larger-than-expected 1.2% decline in 2023, as inflationary pressures and higher interest rates weighed on international trade.

“The reason for this pickup is basically the normalization of inflation and also the normalization of monetary policy, which has been a drag on trade in 2023,” the WTO’s chief economist Ralph Ossa told CNBC’s Silvia Amaro.

The trade rebound is expected to be “broad-based,” including across Europe, which experienced some of the deepest falls in trade volumes last year as a result of geopolitical tensions and the energy crisis caused by Russia’s full-scale invasion of Ukraine.

“Europe was really weighing on international trade in 2023, and we don’t see that being the case anymore,” Ossa said.

Geopolitical risks remain

Overall, world trade has been “remarkably resilient” over recent years, rising above its pre-Covid-19 pandemic peak in late 2023, the WTO report concluded. However, the organization warned that geopolitical tensions could still pose a risk to its outlook.

In particular, the ongoing war between Israel and Palestinian militant group Hamas could cause major trade disruptions, should it spill over into energy markets, Ossa said.

The economist also pointed to signs of global trade “fragmentation” along geopolitical lines.

The WTO report divided the global economy into two “hypothetical geopolitical blocks” based on U.N. voting patterns and found that trade growth between the blocks was slower than within them. The U.S. and U.K. for instance, have typically taken similar positions in recent U.N. votes on the Russia-Ukraine conflict, while China and South Africa, on the other hand, have taken opposite views.

That fragmentation was especially notable between the world’s two largest economies, the U.S. and China.

“We’ve seen that trade growth between the United States and China was 30% slower than trade growth between these countries and other countries,” Ossa said, referring to the period since 2018, when trade tensions initially arose.

“That doesn’t mean that they are not still trading a lot, but their trade shares are increasingly moving away from these relationships.”

Trade tensions between the U.S. and China resurfaced this week, when U.S. Treasury Secretary Janet Yellen said she would not rule out possible tariffs on Beijing, if it is found to be engaging in unfair trade practices. The calls for a tougher stance on China were echoed on Tuesday by European Commission chief Ursula von der Leyen.

The spat centers on claims that China is “dumping” subsidized green technology goods into international markets, effectively undercutting domestic producers. Beijing denies the claims.

The WTO report does not detail China-specific trade forecasts, however it expects a 3.4% aggregate increase in Asia exports in both 2024 and 2025.

“That doesn’t mean that, in particular sectors, we couldn’t see or we don’t expect to see any surges,” Ossa said.

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Economics

UK inflation September 2024

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8 hours ago

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October 16, 2024

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The Canary Wharf business district is seen in the distance behind autumnal leaves on October 09, 2024 in London, United Kingdom.

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LONDON — Inflation in the U.K. dropped sharply to 1.7% in September, the Office for National Statistics said Wednesday.

Economists polled by Reuters had expected the headline rate to come in at a higher 1.9% for the month, in the first dip of the print below the Bank of England’s 2% target since April 2021.

Inflation has been hovering around that level for the last four months, and came in at 2.2% in August.

Core inflation, which excludes energy, food, alcohol and tobacco, came in at 3.2% for the month, down from 3.6% in August and below the 3.4% forecast of a Reuters poll.

Price rises in the services sector, the dominant portion of the U.K. economy, eased significantly to 4.9% last month from 5.6% in August, now hitting its lowest rate since May 2022.

Core and services inflation are key watch points for Bank of England policymakers as they mull whether to cut interest rates again at their November meeting.

As of Wednesday morning, market pricing put an 80% probability on a November rate cut ahead of the latest inflation print. Analysts on Tuesday said lower wage growth reported by the ONS this week had supported the case for a cut. The BOE reduced its key rate by 25 basis points in August before holding in September.

Within the broader European region, inflation in the euro zone dipped below the European Central Bank’s 2% target last month, hitting 1.8%, according to the latest data.

This is a breaking news story and will be updated shortly.

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Why Larry Hogan’s long-odds bid for a Senate seat matters

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October 15, 2024

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FEW REPUBLICAN politicians differ more from Donald Trump than Larry Hogan, the GOP Senate candidate in Maryland. Consider the contrasts between a Trump rally and a Hogan event. Whereas Mr Trump prefers to take the stage and riff in front of packed arenas, Mr Hogan spent a recent Friday night chatting with locals at a waterfront wedding venue in Baltimore County. Mr Hogan’s stump speech, at around ten minutes, felt as long as a single off-script Trump tangent. Mr Trump delights in defying his advisers; Mr Hogan fastidiously sticks to talking points about bipartisanship, good governance and overcoming tough odds. Put another way, Mr Hogan’s campaign is something Mr Trump is rarely accused of being: boring. But it is intriguing.

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Polarisation by education is remaking American politics

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