Trade relations between China and the U.S. are anticipated to experience a significant downturn, according to the WTO.
The United States has reportedly paused its contributions to the World Trade Organization (WTO), adding to the escalating trade dispute between the world's two largest economies. The WTO has warned of a potential decline in global trade due to this dispute, with the volume of global trade expected to shrink by 0.2 percent this year, and in the worst-case scenario, by 1.5 percent.
In response to the US tariffs, China and the US have filed complaints against each other's tariffs with the WTO. The declines in global trade are most significant in North America, including the USA, Canada, and Mexico, according to WTO Chief Economist, Ralph Ossa.
The trade policy of the US government, as described by Ossa, could serve as a potential wake-up call for Europe and the world. Ossa emphasized the importance of managing the diversion effects of trade flows cooperatively to prevent the conflict from escalating further. He also stressed the need to protect and maintain the rest of the global trade, as 87 percent of imports come from outside the USA, with the USA only accounting for 13 percent of all global imports.
In an effort to mitigate the impact of US tariffs, China is reportedly shifting its exports towards Latin America, Vietnam, and Mexico. Vietnam, in particular, has emerged as a significant hub for Chinese exports, especially machinery and electrical equipment. These goods are then re-exported to the US, effectively serving as a re-export channel to bypass some US tariffs.
Mexico is also commonly mentioned as a re-export channel for China due to its proximity to the US and existing trade agreements such as USMCA. China's strategy to route exports through countries with more favorable trade positions or closer ties with the US market is aimed at softening the effects of direct tariffs between China and the US.
Ralph Ossa indicated that China is likely to supply many goods that it would otherwise have exported to the USA to Europe, due to the current trade situation. This shift could potentially impact the European market, as Europe wants to export to America but also needs to ensure the rest of the world sticks together, according to Ossa.
The WTO has lowered its forecast for global economic growth to 2.2 percent, from the 2.8 percent expected before the US tariff announcements. The decline in bilateral trade between China and the USA accounts for only about 3 percent of global trade, but the collapse of this trade could have ripple effects on the global economy.
Canada has filed a complaint against China over additional tariffs on agricultural and fisheries products. Ossa's statements were made during an interview with Bavarian Radio (Bayern 2).
As the trade dispute between the US and China continues, the global trade landscape is undergoing significant changes. The WTO, governments, and businesses worldwide will need to adapt to these changes to maintain global economic stability and growth.
- The economic and social policy of the US government, as exemplified by its tariffs and trade strategy, is causing significant shifts in global trade, and the WTO, political leaders, and businesses must adapt to maintain global economic stability and growth.
- The current trade dispute between the US and China is leading to a redirection of goods, with China shifting its exports towards countries like Latin America, Vietnam, and Mexico as a means to bypass US tariffs, potentially impacting industries such as machinery and electrical equipment finance.
