World Bank warns trade tensions could cause 2008-level crisis from buzai232's blog

A worldwide escalation of the trade tensions between the US and its major trading partners would have consequences for global trade equivalent to the 2008 financial crisis, the World Bank has warned.To get more business events news, you can visit shine news official website.

Using conservative estimates to assess the risks to the world economy from rising economic nationalism of the kind promoted by Donald Trump, the Washington-based organisation warned of “severe consequences” for world trade and economic growth, with the harshest impact reserved for developing nations. Under the scenario outlined in its latest global economic prospects report published on Tuesday, the bank found a broad-based increase in the use of import tariffs worldwide – to the maximum levels permitted by the World Trade Organisation – would trigger a decline in global trade amounting to 9%.

Business Today: sign up for a morning shot of financial news Read more While that would be similar to the drop experienced during the financial crisis of 2008-09, it warned the impact could be even greater if countries went further than the WTO rules. Advertisement Franziska Ohnsorge, the lead author of the bank’s report, said: “The threat of trade protectionism is a real risk. Anything that puts sand in the wheels of global trade is a risk to global growth.” The intervention by the bank, which was established alongside the International Monetary Fund after the second world war to reduce poverty in poor countries and to foster greater international collaboration and economic development, comes amid an increasingly bitter trade dispute between the US and its traditional allies.

The Trump administration last week imposed border tariffs on steel and aluminium imports from the European Union, Canada and Mexico, triggering angry responses and countermeasures, which could unravel decades of political consensus over the benefits of free trade. Concerns also remain over an escalation of tensions between the US and China amid similar threats of protectionism from the White House and a promise of retaliation by Beijing.

The bank said the risks from a full-blown trade war would be worse for developing nations, because their fortunes are often linked to the strength of major nations’ economies. Ohnsorge said a 1% decline in growth in the US, China or the euro area could reduce growth in emerging economies over a year or two by up to 1.1%. Without giving precise details for how much a full-scale economic conflict would lower world GDP, she said: “Trade has been an important source of euro area growth, Japanese growth and a lot of emerging market economies are very linked to that growth.”