The OECD on Wednesday (May 30) appealed for an end to the “escalation” in global trade tensions, as the introduction of US tariffs on steel and aluminium imports loomed.
|President Donald Trump’s steel and aluminium tariffs sent shock waves across global markets for weeks. (Photo: AFP/Mandel Ngan)|
President Donald Trump announced the shock 25 percent tariffs on steel and 10 per cent duty on aluminium in March, sparking a global diplomatic tussle that sent the markets into choppy waters for weeks.
The tariffs are due to enter into force from Jun 1, despite efforts by world leaders including France’s Emmanuel Macron and Germany’s Angela Merkel to bring the multilateral trade system back from the brink.
The EU’s top trade official earlier this week said it was unrealistic at this stage to hope for a permanent exemption for the bloc from the tariffs before they kick in on Friday.
Separately, the United States is readying trade sanctions against China over intellectual property theft.
Despite announcing a truce in the trade hostilities less than two weeks ago, the White House has since signalled it is ready to pull the trigger on a broad array of penalties.
“First and foremost, an escalation in trade tensions should be avoided,” the Organisation for Economic Cooperation and Development’s acting chief economist Alvaro Pereira said.
“Since the world economy is much more integrated and linked today than in the past, a further escalation of trade tensions might significantly affect the economic expansion and disrupt vital global value chains,” he added.
THREAT TO GROWTH
The OECD’s last-ditch appeal follows similar warnings from the World Trade Organisation and the International Monetary Fund.
The protectionist threat from Trump’s “America First” administration is looming large over the outlook for global growth, which the OECD has put at 3.8 per cent, close to the pre-financial crisis average.
The organisation meanwhile voiced concern over the recent spike in oil prices.
The rise in prices follows a deal reached in 2016 between the OPEC cartel and Russia to cut production following a glut that had sent prices crashing and the crude sector into disarray.
“Oil prices have risen significantly in the past year, and, if sustained, could add to inflation while softening real household income growth,” the OECD said in a statement.
“The threat of trade restrictions has begun to adversely affect confidence, and, if such measures were implemented, they would negatively influence investment and jobs,” it added.
The OECD’s warning came as the organisation held its annual forum in Paris under the theme of “What brings us together”.
The 35-nation OECD was founded in 1961 and membership of the body immediately raises a country’s economic profile and opens the possibility for deeper international ties on economic, educational and social matters.
The forum convened as global markets felt the heat from Italy, where a political crisis following the electoral win of an anti-establishment, far-right alliance has raised fears of a fresh eurozone crisis.
Without making any mention of the political turmoil, the OECD said it expected the Italian economy to grow 1.4 per cent in 2018, and 1.1 per cent in 2019.
US economic growth was expected to stand at 2.9 per cent this year and 2.8 per cent.
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