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Global Trade Report: International Trade to Grow 4.4 Percent in 2018

By Karen Lynch

International trade in goods outperformed expectations in 2017, growing at 4.7 percent, the World Trade Organization (WTO) reported in April 2018. For this year and next, the WTO’s global trade report shows growth remaining above the 3 percent it has averaged annually since the global financial crisis of 2008-2009. Yet it is expected to ramp down slightly this year to 4.4 percent and drop again in 2019 to 4 percent.1

The latest global trade report “represents the best run of trade expansion since before the crisis,” said WTO Director-General Roberto Azevêdo. Notably, growth for 2017 was up sharply from 1.8 percent in 2016, he said.2

 

In tandem, the International Monetary Fund (IMF) proclaimed that, “The global economic upswing that began around mid-2016 has become broader and stronger.” Global economic growth overall (international and domestic) is projected at 3.9 percent for both 2018 and 2019, compared with 3.8 percent in 2017.3

 

Solid international trade and economic growth are mutually reinforcing trends. However, both the WTO and IMF pointed to risks that could dim their current outlooks, including strained international trade relations among some of the world’s largest economies and global debt that is high by historical standards. The WTO reported signs that trade tensions are affecting business confidence and investment decisions, which could decrease international trade growth. The IMF warned that worldwide debt reached a record $164 trillion in 2016, equivalent to 225 percent of global GDP, in its Fiscal Monitor for April 2018.4

 

Global Trade Report

 

All world regions experienced international trade growth in 2017, the WTO said. Exports of goods, typically measured by volume, grew 3.5 percent from developed countries and 5.7 percent from developing countries, up from 1.1 percent and 2.3 percent, respectively, in 2016. Imports of goods by developed countries grew 3.1 percent, up from 2 percent in 2016. The largest import gains were recorded in developing countries, which rose in one year to 7.2 percent from 1.9 percent.5

 

“North American exports and imports rebounded strongly in 2017 with growth of 4.2 percent and 4.0 percent, respectively, after stagnating in 2016,” the global trade report said.6

 

When measured by value, international trade in goods grew 11 percent in 2017. By this measure, U.S. exports grew 6.6 percent in 2017, after dropping 3.4 percent in 2016, and U.S. imports grew 7.1 in 2017, after dropping 2.8 percent in 2016. The U.S. is the largest importer of goods and China is the largest exporter, the global trade report said.

 

International trade in services, measured by value, grew 7 percent worldwide in 2017, a significant improvement following two years of weak-to-negative growth, the global trade report said. In the United States, services exports grew 3.8 percent and services imports grew 6.8 percent. The U.S. is both the largest importer and largest exporter of commercial services.7

 

“The fact that all regions are experiencing upswings in trade and output at the same time could … make recovery more self-sustaining and increase the likelihood of positive outcomes,” the global trade report said. Looking ahead, however, signals are mixed.8

 

On the one hand, an index of container port throughput was close to its highest level ever in February 2018, suggesting strong trade growth. On the other hand, a measure of global export orders derived from purchasing managers’ indices dipped in March 2018, which the global trade report attributed in part to mounting international trade tensions. “Another major risk is an unanticipated hike in inflation in one or more countries, which could cause monetary authorities to raise interest rates precipitously and cause economic growth to slow, with negative consequences for trade,” the report said.

 

IMF World Economic Outlook

 

The IMF’s global economic growth forecast for this year and next has risen since its October 2017 forecast: to 3.9 percent from 3.7 percent. “Growth this broad based and strong has not been seen since the world’s initial sharp 2010 bounce back from the financial crisis of 2008–09,” the IMF report said, though “this positive momentum will eventually slow.” 9

 

Projections for U.S. economic growth rose to 2.9 percent for 2018 (up from 0.6 percent) and 2.7 percent in 2019 (up from 0.8 percent), after recording 2.3 percent growth in 2017.10

 

Looking ahead, the IMF cited factors including trade tensions, spiking interest rates, aging populations, falling rates of labor force participation, low productivity growth, and debt as risks that could change its current outlook. “Advanced economies … will likely not regain the per capita growth rates they enjoyed before the global financial crisis,” the organization said. 11

 

Global debt concerns were underscored in the IMF’s Fiscal Monitor. Government debt in advanced economies is at 105 percent of GDP on average – a level not seen since World War II, according to the monitor.12Government responses to the financial crisis are cited as one major cause, while private debt is actually higher than public debt. Specifically, nonfinancial private sector debt represented 63 percent of the total $164 trillion worldwide, according to IMF officials. 13China, Japan, and the U.S. account for more than half of global debt.

 

“It is important to note that large debt and deficits hinder governments’ ability to implement a strong fiscal policy response to support the economy in the event of a downturn,” the IMF monitor said.14 In the meantime, “the current cyclical upswing offers policymakers an ideal opportunity to make longer-term growth stronger, more resilient, and more inclusive,” said IMF Economic Counsellor Maurice Obstfeld.15

 

The

Takeaway:

The WTO and IMF have upgraded their projections for international trade growth and global economic growth in 2018 and 2019. At the same time, they have issued warnings that factors including trade tensions, inflation, and historically high global debt could lower their current outlooks. “Risks are centered on trade and monetary policy, where missteps could undermine economic growth and confidence,” the WTO said in its global trade report.16

Karen Lynch - The Author

The Author

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners

Sources

1. “Strong Trade Growth in 2018 Rests on Policy Choices,” World Trade Organization; https://www.wto.org/english/news_e/pres18_e/pr820_e.htm
2. “World Trade Forecasts: Press Conference,” World Trade Organization; https://www.wto.org/english/news_e/spra_e/spra218_e.htm
3. World Economic Outlook, April 2018: Cyclical Upswing, Structural Change, International Monetary Fund; https://www.imf.org/en/Publications/WEO/Issues/2018/03/20/world-economic-outlook-april-2018
4. “IMF Fiscal Monitor: Capitalizing on Good Times, April 2018, International Monetary Fund; https://www.imf.org/en/Publications/FM/Issues/2018/04/06/fiscal-monitor-april-2018
5. “Strong Trade Growth in 2018 Rests on Policy Choices,” World Trade Organization; https://www.wto.org/english/news_e/pres18_e/pr820_e.ht
6. Ibid.
7. Ibid.
8. Ibid.
9. World Economic Outlook, April 2018: Cyclical Upswing, Structural Change, International Monetary Fund; https://www.imf.org/en/Publications/WEO/Issues/2018/03/20/world-economic-outlook-april-2018
10. Ibid.
11. Ibid.
12.IMF Fiscal Monitor: Capitalizing on Good Times, April 2018, International Monetary Fund; https://www.imf.org/en/Publications/FM/Issues/2018/04/06/fiscal-monitor-april-2018
13.“Bringing Down High Debt,” IMF Direct; https://seekingalpha.com/article/4163762-bringing-high-debt
14.IMF Fiscal Monitor: Capitalizing on Good Times, April 2018, International Monetary Fund; https://www.imf.org/en/Publications/FM/Issues/2018/04/06/fiscal-monitor-april-2018
15. “Global Economy: Good News for Now but Trade Tensions a Threat,” International Monetary Fund; https://blogs.imf.org/2018/04/17/global-economy-good-news-for-now-but-trade-tensions-a-threat/
16. “Strong Trade Growth in 2018 Rests on Policy Choices,” World Trade Organization; https://www.wto.org/english/news_e/pres18_e/pr820_e.htm

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