U.S. President Donald J. Trump speaks during a “MAGA” rally at the Williamsport Regional Airport on May 20, 2019 in Montoursville, Pennsylvania.
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Global trade tensions that are hitting growth and investment need to be dealt with at a multilateral level, the OECD’s chief economist told CNBC Tuesday.
“It’s trade tensions and disputes that have derailed global growth,” Laurence Boone said. “It wasn’t only the only thing — we had (financial turmoil in) Argentina, we had Turkey, we had some volatility in financial conditions but it has definitely been a very important part as trade and investment have weakened hand in hand.”
The global economy is expected to achieve moderate but fragile growth over the coming two years, the OECD said in its latest economic outlook report published Tuesday.
“Vulnerabilities stem from trade tensions, high policy uncertainty, risks in financial markets and a slowdown in China, all of which could further curb strong and sustainable medium-term growth worldwide,” the OECD said.
On Monday, the OECD’s Secretary General Angel Gurria told CNBC that uncertainty borne from the ongoing U.S.-China trade dispute is “the greatest enemy of growth.”
His comments follow a ramping up of tensions between the two superpowers after President Donald Trump announced earlier in May that he would increase tariffs on $200 billion in goods from 10% to 25%. China responded by upping the tariffs on $60 billion of U.S. goods.
Relations deteriorated last week when the Trump administration added Chinese tech giant Huawei to a list of companies that U.S. firms cannot trade with unless they have a license, although some of those restrictions were eased Monday.
The OECD’s chief economist said more certainty will only be obtained if trade tensions were dealt with at a multilateral level.
“The World Trade Organization (WTO) was created in 1995 and it’s true that there are (now) new issues — like digital trade, intellectual property rights, subsidies — but these are best dealt with at a multilateral way if we want to preserve confidence worldwide and that’s what we’re calling for.”
A year ago, the OECD predicted that global growth would be 3.9% in 2019. Now, the organization forecasts 3.2% growth for this year, and 3.4% in 2020.
The organization said escalating trade conflicts and financial vulnerabilities were mainly to blame, among more localized problems. It noted that world trade is projected to grow by just over 2% this year, the lowest rate in a decade.
The OECD’s latest report includes downward revisions for many major economies and warns that current growth rates are insufficient to bring about major improvements in employment or living standards.