Macroscope | Why we may escape a US-China trade war, but not turmoil in global trade

Neal Kimberley says on top of the economic uncertainty, rising oil prices, rising interest rates and a slowdown in Europe and Japan are creating conditions for a perfect storm. Economies should brace themselves for ill winds

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A view of the Majestic Maersk vessel off Elsinore in Denmark in 2013. Rising energy costs must put upward pressure on production and transport costs. Indeed, Maersk, the world’s biggest container shipper, said last week that container freight rates had increased by 7 per cent in the first quarter. Photo: EPA-EFE

Published: 11:30am, 22 May 2018Updated: 9:47pm, 3 Jul 2018

International commerce could be sailing into troubled waters, driven by adverse trade winds that appear to have been the result of global trade tensions. But the explanation for such adverse trade winds might not be quite that simple. There’s more than one headwind blowing.

On May 17, data from the World Trade Organisation showed that while global merchandise trade had expanded at above-trend pace in the first quarter of 2018, the outlook suggested slower growth. But, as it said, “risks to the trade forecast posed by rising trade tensions remain present”.

The WTO’s latest World Trade Outlook Indicator revealed a current value of 101.8, which, while above the index’s baseline value of 100, was below the previous value of 102.3. The recent dip in the indicator reflects a decline in two component indices – export orders and air freight, “which may be linked to rising economic uncertainty due to increased trade tensions”, the WTO said.

Earlier this month, while announcing that total exports of goods grew strongly by 5.2 per cent year on year in real terms in the first quarter, the Hong Kong government also noted how “external uncertainties have increased of late”, flagging for concern the “trade tensions between the US and its trading partners, notably the mainland”.

Elsewhere, deterioration in international trade flows is already discernible.

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