• World trade growth is expected to remain strong in 2018 and 2019.
  • WTO economists anticipate merchandise trade volume growth of 4.4% in 2018.
  • Growth is expected to moderate to 4% in 2019, below the average rate of 4.8% since 1990 but still firmly above the post-crisis average of 3%.
"The strong trade growth that we are seeing today will be vital for continued economic growth and recovery," says WTO

"The strong trade growth that we are seeing today will be vital for continued economic growth and recovery," says WTO

World merchandise trade growth posted its largest increase in six years in 2017, but continued expansion depends on robust global economic growth and the pursuance of appropriate trade policies, new figures show.

The latest data from the World Trade Organization (WTO) shows world trade growth is expected to remain strong in 2018 and 2019. WTO economists anticipate merchandise trade volume growth of 4.4% in 2018, as measured by the average of exports and imports, roughly matching the 4.7% increase recorded for 2017.

Growth is expected to moderate to 4% in 2019, below the average rate of 4.8% since 1990 but still firmly above the post-crisis average of 3%. However, there are signs that escalating trade tensions may already be affecting business confidence and investment decisions, which could compromise the current outlook.

"The strong trade growth that we are seeing today will be vital for continued economic growth and recovery and to support job creation," says WTO Director-General Roberto Azevêdo.. However this important progress could be quickly undermined if governments resort to restrictive trade policies, especially in a tit-for-tat process that could lead to an unmanageable escalation. A cycle of retaliation is the last thing the world economy needs.

"The pressing trade problems confronting WTO Members is best tackled through collective action. I urge governments to show restraint and settle their differences through dialogue and serious engagement,"

Trade volume growth in 2017, the strongest since 2011, was driven mainly by cyclical factors, particularly increased investment and consumption expenditure. In value terms, growth rates in current US dollars in 2017 (10.7% for merchandise exports, 7.4% for commercial services exports) were even stronger, reflecting both increasing quantities and rising prices.

Merchandise trade volume growth in 2017 may also have been inflated somewhat by the weakness of trade over the previous two years, which provided a lower base for the current expansion. 

Despite the improved outlook, some structural factors that weighed on trade in recent years are still present, the report notes. This includes the rebalancing of the Chinese economy away from investment and toward consumption, as well as the reduced pace of global trade liberalisation in recent decades.

China's rebalancing might dampen imports slightly in the short-run but it should produce stronger, sustainable growth over the long term, which would support more trade, the report says. On the other hand, the lack of further substantive liberalisation would be expected to produce subdued trade growth in both the short and long-run.

Looking to 2018 and 2019, some leading and coincident indicators of merchandise trade continued to point in a generally positive direction in the first quarter of 2018 while others have taken a negative turn. An index of container port throughput was close to its highest level ever recorded in February, suggesting strong trade growth.

However, a measure of global export orders derived from purchasing managers' indices dipped in March, falling to 51.8, its lowest level since December 2017. A value above 50 still indicates expansion, but the recent weakening could be attributed to rising anti-trade rhetoric, the WTO says.

Balanced against these broadly positive signs is a rising tide of anti-trade sentiment and the increased willingness of governments to employ restrictive trade measures. 

Another major risk is an unanticipated hike in inflation in one or more countries, which could cause monetary authorities to raise interest rates precipitously and cause economic growth to slow, with negative consequences for trade. 

Assuming current forecasts for GDP growth come to pass, the WTO is forecasting world merchandise trade volumes to be stronger for developing economies in both exports (5.4%) and imports (4.8%).

Developed countries should also see fairly strong growth on both the export side (3.8%) and the import side (4.1%). In 2019 global trade growth is projected to moderate to 4%, with developing economies still outpacing developed countries in both exports (5.1% compared to 3.1%) and imports (4.4% compared to 3.3%). However, economic activity would also be expected to take a hit from escalating trade restrictions, which could result in more negative scenarios being realised.