The trading sentiment at a global level has been at one of its lowest ebbs for quite some time, and perhaps the primary trigger for that has been trading war between the United States and China. When the two biggest economies in the world are involved in a trade war, then it is certain to have a ripple effect on the rest of the world, and that is what the World Bank believes will happen this year. Back in January, the World Bank had stated that the global economy would grow by 2.9% this year, but in a new development, it cut the projection for global growth for the year to 2.6%. The financial institution stated argued that trade growth has slowed down considerably and in addition to that investment at a global level has also taken a considerable hit.
Needless to say, much of the dwindling global trade is down to the trade US-China trade war, and it is interesting to note that the previous forecast had been at a time when there was hope that the issue would be resolved amicably. However, last month, the trade tensions escalated, and now there is no end in sight. David Malpass, the President of World Bank, stated,
There’s been a tumble in business confidence, a deepening slowdown in global trade and sluggish investment in emerging and developing economies. Momentum remains fragile.
The latest report blamed the trade tensions and threats of escalation as the biggest reason behind the gloomy outlook. The report stated,
Heightened policy uncertainty, including a recent re-escalation of trade tensions between major economies, has been accompanied by a deceleration in global investment and a decline in confidence.
In this regard, it is important to point out that other leading financial giants like Goldman Sachs and Morgan Stanley have also made gloomy forecasts. While Goldman Sachs believes that the trade tensions are only going to escalate, the chief economist at Morgan Stanley has stated that if the trade war goes on for the foreseeable future, then there could be a recession within three or four quarters.