Global trade cycle sends a terse warning

As the trade cycle turns, so goes the global economy. But there is a new twist. With growth in global trade sharply diminished since the 2008-09 global financial crisis, an upsurge of protectionism and disrupted global supply chains has become all the more problematic. There is a distinct possibility that a turn in an already weakened trade cycle could spark a surprisingly swift deterioration in the global economy.

Early hints of just such an outcome are evident in the January update of the International Monetary Fund's World Economic Outlook. While the IMF has revised downward its 2019 forecast of world GDP growth by 0.2 percentage points (from 3.7 percent to 3.5 percent), it has made just a fractional reduction to its projection of 4 percent global trade growth. This is certainly puzzling. In a climate of increased tariffs between the United States and China, with threats of more to come, and given Brexit-related risks to eurozone trade, there is good reason to look for more significant downward revisions to the global trade outlook.

Global trade outlook gloomy