There is a potential slump in global trade on the horizon, according to the latest Intelligence Unit from The Economist (EIU). There is a moderate probability (21%-30%) that U.S. protectionism will have a very high impact (2% or more) on the global annual gross domestic product (GDP) in the next two years.
A strong global trade growth is expected this year and next despite the possible risks from U.S. policies, noted the EIU. The report cited two major developments that would be catalysts: an American withdrawal from the North American Free Trade Agreement (NAFTA) and a trade war with China.
The U.S., Mexico and Canada have gone through multiple rounds of negotiating during the past several months. Meanwhile, the U.S. has already imposed tariffs on solar cells and washing machine imports from China. On Feb. 27, the Commerce Department announced its findings for antidumping duty (AD) and countervailing duty (CVD) investigations on aluminum foil from China. The U.S. International Trade Commission still needs to review the determinations before the AD and CVD are finalized by Commerce.
U.S. protectionist policies and prolonged stock market falls were the top two global risks, according to the report. South China Sea territorial disputes and countries withdrawing from the eurozone were also among the top 10 risks.
-Michael Miller, managing editor