Speaking at an event in Rio de Janiero last month, WTO Director General Roberto Azevêdo delivered an ominous prediction: As optimistic reports suggested that the two sides would soon restart substantive talks, Azevedo told his audience that the trade war between the US and China was far from over.
"To be honest, I don’t think it’s over. They have lots of ammunition and it can expand to other areas beyond just tariffs...and trade," he said.
And now, the WTO's forward-looking indicator is showing a similar conclusion. According to an update released on Thursday, the WTO's World Trade Outlook Indicator shows that trade is slowing again in Q4 for the second straight quarter.
The indicator showed declines in all seven of the drivers of trade that it tracks, with an overall reading of 98.6, the lowest since October 2016, and lower than the 100.3 reading from he previous quarter. Any reading below 100 is indicative of below trend growth. The biggest driver of the index's drop was a decline in export orders, which sunk to 96.6, it lowest reading since the depths of the eurozone crisis in 2012.
World trade volume already slowed dramatically in Q3 with September's 1.2% drop in world trade the biggest drop since April 2017.
Readings for car production and sales (96.9), electronic components (93.9), and agricultural raw materials (97.2) all moved from on-trend to below trend, while international air freight (100.0) and container port throughput (101.2) dipped but remained on trend.
The WTO's gauge has historically been a reliable indicator.
The latest results are consistent with the WTO's downgraded outlook for global trade, which it issued back in September as trade tensions between the US and China flared and before the US, Canada and Mexico agreed to the final framework for Nafta 2.0. The WTO expects trade growth to slow to 3.9% in 2018, and 3.7% in 2019, from 4.7% in 2017.
While Trump's meeting with Chinese President Xi Jinping later this week holds some hope of progress, most Wall Street analysts agree that an accord is unlikely: The best we can hope for is that the two leaders create a "pathway" to further talks. Until that happens, the outlook for trade growth will likely remain dim.