WTO Warns of the Risk Facing the Global Economy Due to Trade Wars
World Trade Organization says that the economic growth across the globe could be threatened by the tit-for-tat trade sanctions amongst the economic superpowers. The tariff wars were triggered by President Trump’s decision to impose tariffs on steel and aluminum imports from China and the EU. In his defense, President Trump said that he was onlyout to protect American jobs since the deals of the global free trade had been bad for the US.
In response to the tariffs imposed by Trump’s administration, China and EU responded with retaliatory tariffs on American cars and agricultural products worth hundreds of billions of pounds.
Most economists have indicated that trade wars witnesses in the previous years have escalated economic problems and resulted to higher prices as well as loss of jobs. The WTO has said that the trade restrictive measures have come at a time characterized by increased trade tensions. Thus, the situation should worry the entireinternational community.
The WTO report which encompassed the seventh months between October 2017 and May 2018 indicated that G20 countries enforced 39 new measures that were trade restrictive. The new measures were double the figure given in the previous report. The report further indicated that the new sanctions impacted$74.1bn which is also higher than the number provided in last year’s report.
The WTO asserted that the trade restrictive measures could jeopardize economic recovery because they are coming at a time when the world economy is starting to establish sustained economic momentum. As such, further escalation of the trade wars attracts larger risks for the global economic system. The trade organization emphasized on the need for the G20 economies to utilize all strategiesto de-escalate the current situation and guarantee trade recovery.
WTO’s warning is likely to heighten the tensionswith the US president who has asserted that the existing trade rules are discriminatory of the US. The WTO has disagreed with Trump’s assertions saying that few trade barriers encourage growth and job increment – not only for emerging economies such as China but for countries like the United States as well.
Economic models have shown that reduced import taxes translated to cheaper goods for the consumers. Economists argue that if China and the EU proceed with the retaliatory tariffs, then the risk would shift to millions of Americans working in the agricultural and automobile sector.
Additionally, the think tank, Oxford Economics, suggest that the present threats of further imposition of sanctions by the US, EU and China could result to extension of tariffs by an additional 4%.