The World Trade Organization published a new report that shows world trade is projected to "face strong headwinds" into 2020.
WTO economists expect merchandise trade volume growth to drop to 2.6% in 2019, down from 3% last year. The report said a rebound in global trade is possible if trade tensions dramatically ease.
The bearish forecast for 2019/2020 marks the second consecutive year that WTO economists revised their outlook and also follows similar warnings from the World Bank and the International Monetary Fund.
"With trade tensions running high, no one should be surprised by this outlook. Trade cannot play its full role in driving growth when we see such high levels of uncertainty," WTO Director-General Roberto Azevedo said in a statement in Geneva.
"It is increasingly urgent that we resolve tensions and focus on charting a positive path forward for global trade which responds to the real challenges in today's economy – such as the technological revolution and the imperative of creating jobs and boosting development. WTO members are working to do this and are discussing ways to strengthen and safeguard the trading system. This is vital. If we forget the fundamental importance of the rules-based trading system we would risk weakening it, which would be a historic mistake with repercussions for jobs, growth and stability around the world," Azevedo said.
The report said current forecasts reflect downgraded GDP projections for North America, Europe, and Asia -- mostly due to waning effects of fiscal stimulus by the Trump administration.
WTO economists noted a "phase-out" of monetary stimulus in Europe and a continuing economic transition of China's economy from manufacturing to services.
The reported noted that trade growth severely waned in 2H18 by several factors, including several rounds of tariffs and retaliatory tariffs affecting hundreds of goods, an already slowing Chinese economy, volatility in financial markets, and tighter monetary conditions by Central Banks.
Forward-looking trade indicators turned negative in 1Q19, including WTO's World Trade Outlook Indicator (WTOI). WTOI index dropped to 96.3, below its baseline value of 100, indicating that the global slowdown will persist for some time.
The sustained loss of trade momentum highlights the urgency of the Trump administration to reduce trade tensions, which together with the rise of nationalism and financial volatility could deepen the synchronized global slowdown well into 2020.