On Wednesday, the World Trade Organization (WTO) released their “Global Trade Outlook” report. It explores four major predictions of changes in international trade dynamics, including shifts in Chinese exports and the economic relationship between the United States and China.
The report calls out a dangerous decoupling between the Chinese and US economies. If it does, merchandise trade between the two nations could fall by 81% by 2025. In a more extreme case with no recent exemptions granted, this number could be as high as an incredible 91%. These tensions have far-reaching implications that go beyond the value of bilateral trade alone. Consequently, growth of world merchandise trade is projected to decrease by 0.2% in 2025, almost three percentage points below previous projections.
The report forecasts a 6% growth in Chinese re-exports to Europe. This forecast points to a major emerging trend in goods trade—the global reconfiguration of trade patterns as economies respond to new and persistent geopolitical pressures. In addition, Chinese goods exports are forecast to grow 4% to 9% in every major market except North America.
The report emphasizes that the decoupling of the US and Chinese economies will likely lead to a broader fragmentation of the global economy into two isolated blocs, exacerbating existing geopolitical divides. WTO Director-General Ngozi Okonjo-Iweala highlighted that these trends would have lasting impacts on the potential for global economic growth.
“Our estimate is that global world GDP would be lowered by nearly 7% in the long term,” – WTO Director-General Ngozi Okonjo-Iweala
In 2018, trade tensions have skyrocketed between China and the US, evidenced by increasing tariffs on hundreds of billions of dollars in goods on both sides. Chinese imports into the United States are subject to massive tariffs, averaging 145%. Conversely, US goods shipped to China now face tariffs as high as 125%. Additionally, the US has implemented 10% tariffs on various EU exports and 25% tariffs on European cars, steel, and aluminum.
Okonjo-Iweala underscored the need to rethink trade approaches in response to such shocks.
“One of the clearest lessons of the COVID-19 crisis is the importance of diversifying sources of supply. Today’s trade tensions remind us that we must also diversify demand,” – WTO Director-General Ngozi Okonjo-Iweala
At the same time, global economies stress under the burden of reversed trade preferences and increased geopolitical brinks. The WTO’s findings are an important wake-up call to how fragile and interconnected international commerce is, and a reminder that strategic foresight can be invaluable.
“Overconcentration, whether it is where we buy from or where we sell to, leads to overdependence, making economies more vulnerable to shocks and fostering a sense of unfair burden-sharing.” – WTO Director-General Ngozi Okonjo-Iweala
As global economies grapple with evolving trade relations and geopolitical tensions, the implications of the WTO’s findings serve as a critical reminder of the interconnected nature of international commerce and the need for strategic foresight.
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