2 days Ago
'Alarming Drag' World Bank Chief Economist Indermit Gill cautioned that global trade erosion and increasing uncertainty might inflict deep wounds on living standards. "Without a rapid course correction, damage to living standards could be deep," he said.
Trump's Tariffs, and the Impact on Global Trade
The downgrade follows new US tariffs enacted in April, which include a 10 percent blanket duty on most imports, and higher duties on steel and aluminium. Some of those hikes have been on pause until early July, but their effect has already driven the effective rate of US tariffs to its highest level in almost a century.
These and other measures, including China's own retaliatory tariffs, have disrupted trade flows and taken their toll on both advanced and emerging economies. I known as rich countries will mostly recover to pre-pandemic growth patterns by 2027, developing ones could end up 6 percent below pre-pandemic levels — except for China, according to the World Bank. Commodity-exporting countries are also being squeezed by weaker and more volatile prices.
Call for Global Trade Reforms
"The only antidote to this uncertainty will be policy reform at a global scale," Gill emphasized. He advocated for countries—though not necessarily the US—to lower tariff and non-tariff trade barriers, "especially through the pursuit of broader and more balanced trade agreements with all major economies. "Every country should treat all the countries alike," Gill said.
It's for that reason that although this is a call to action, the report points to a disturbing trend. Growth expectations are dimming, from advanced economies (the United States, Europe) to developing regions, as the risk of inflation lingers. Even so, Gill says he still believes that coordinated policy responses can help prevent lasting damage.
