Global economic prospects worsening rapidly as WTO slashes trade forecast

'With trade tensions running high, no one should be surprised by this outlook,' WTO Director-General Roberto Azevedo said

The World Trade Organisation (WTO) has slashed its forecast for global trade due to an economic slowdown and a tariff war between the US and China.

Trade will grow just 2.6 per cent this year, down from 3.7 per cent predicted by the WTO just six months ago, showing how rapidly the world economy’s prospects are declining.

“With trade tensions running high, no one should be surprised by this outlook,” WTO Director-General Roberto Azevedo said on Tuesday.

China and America, the world’s two economic superpowers, have yet to resolve a long-running dispute that has seen Donald Trump’s administration slap tariffs on hundreds of billions of dollars in Chinese imports, with Beijing responding in kind.

US data indicates the effect of Mr Trump’s $1.5 trillion tax cut is wearing off fast. Retail sales unexpectedly fell in February, while orders of capital goods also fell.

Trade grew by just 3 per cent last year — well below the WTO's forecast of 3.9 per cent, which was already a downgrade from previous estimates.

The WTO oversees international trade rules and settles disputes between countries. The Trump administration has also been highly critical of the WTO, accusing it of being “unfair” with the United States.

The US has slowly squeezed the WTO by blocking appointments to its dispute settlement group, the Appellate Body, which could in December fall below the minimum number of members required.

Mr Azevedo pointed to the “fundamental importance of the rules-based trading system,” saying that its weakening would “be an historic mistake with repercussions for jobs, growth and stability around the world.”

Additional reporting by AP