January - Trade Outlook
Trade in 2018: Where politics and economics collide
The difficult environment for trade in value terms is likely to continue during 2018. Although oil prices are likely to rise, and inflationary pressures set to build in Europe and the UK, this will still be insufficient to create a strong increase in the value of world trade during the course of the coming year. We expect world trade value growth to be flat or negative and for many countries to follow this pattern. (Figure 1). The only exception is the UAE which may show substantially increased trade in 2018 on the back of the oil price recovery and a diversion of trade from riskier countries in the region.
Figure 1: World trade growth by country, 2017-18 (%) and CAGR, 2017-21 (%)
NOTE: Projections are based on long and short term momentum and do not make assumptions about GDP, freight costs, or any future trade negotiations
This picture of trade is very much more negative than that of the World Trade Organisation (WTO). There are two reasons for this. First, the WTO bases its forecasts on volumes rather than values. Thus, while we may see volumes of trade increase, its real value may not increase – either because of inflationary pressures or because the US dollar remains comparatively weak. Second, the WTO picture is often over-optimistic, and its estimates of global volume growth of 3.6% in 2017 made last July already look awry in the light of flat trade towards the end of the year. The WTO is itself forecasting slower trade growth globally in 2018 of 3.2% and the value projections show a similar decline on last year.
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UPDATE: Rebecca Harding and ‘The Weaponization of Trade’ Quoted in The Financial Times article ‘Discourse on trade has become weaponised’, 10th January 2018, page 11:
“The Weaponization of Trade: the Great Unbalancing of Politics and Economics” by Rebecca Harding and Jack Harding
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