While François Bayrou said, Tuesday, April 15, that France does not “Product not enough” and that reindustrialisation should become a “obsession nationale”the WTO, the world Trade Organization revives its strongly decreasing forecasts. It expects a decline in world trade this year, going from 3% to between 0.2 and 1.5% in volume, depending on the customs policy of donald Trump to come.
This already has notable effects, according to the WTO which says that “Chinese goods exports should increase by 4% to 9% in all regions outside North America, thanks to the reorientation of trade”. North America, it should know “A 12.6% drop in exports and 9.6% of imports in 2025”. And the least advanced countries (PMA), turned towards export, could undergo “serious repercussions” with the restorations of American customs duties.
In summary, “Persistent uncertainty threatens to curb global growth, with severe negative consequences for the world, especially for the most vulnerable economies”according to the director general of the WTO.
franceinfo : Vincent Vicard, you are an economist specializing in international trade issues, assistant to the director of the CEPII, French center for research and expertise in international economics, and author of Should we reindustrialize France? At PUF. You expected these forecasts downwards ?
Vincent Vicard : So it’s a challenge to make forecasts with the uncertainty that we know at the moment. Donald Trump makes extremely high customs duties, then returned back a week later. To make forecasts for the year means making forecasts on what Donald Trump will do in the coming months. And so that, nobody knows it. Himself, we don’t really know if he knows.
“The negotiations which are supposed to take place at the moment with all the countries, we do not really know where they are going, nor what is the very objective of Donald Trump with these negotiations.”
Vincent Vicard, assistant to the director of CEPIIin franceinfo
It is not a surprise that these customs duties lead to a drop in international trade. It is an important shock for international trade. It is the main country, the United States, which represents 13% of global imports, which puts customs duties of 10% on all of its partners and higher on certain products that are much exchanged, such as steel, aluminum or automobile.
And what do you think should be the response of the European Union?
The European Union’s response, it must be of two orders. On the one hand, vis-à-vis the United States, there is a need to set up a proportionate response, because there is a negotiation which must be led to the balance of power initiated by the Trump administration. The question is whether it is done on property, with customs duties, or on services, with market access restrictions for American service exporters to the European Union. This is a question that must be asked by governments and the European Commission. Then, vis-à-vis China, there is a need to have a coordinated response also compared to the United States, to find out how we will manage this redirection of trade and not cause an escalation. Otherwise it would really be the worst situation: having an escalation and a second front in a global trade conflict.
Do the members of the European Union not tend to compete with each other, even if it means putting sticks in the wheels?
We know that there are divergent interests. They are not the same in Germany, which is much more open to trade, which has interests in China, including its car producers, and which is much more exporting to the United States. Other countries such as Ireland or Italy are also more exposed to the United States. But you have to see the extent of the shock that we knew with Donald Trump, when he has only been there for three months. The number of announcements that we had on international trade, restrictions, threats to a number of subjects, at the same time outside of trade. Subjects that relate to security.
“It seems to me that there is still a logic of European response which begins to take shape, and which goes beyond the dissensions between European countries.”
Vincent Vicardin franceinfo
With a chance, perhaps, of a real European response and a deepening of the European market which strengthens the Union.
What is the WTO IS Today, does it still have power?
The World Trade Organization was already in bad shape even before Donald Trump arrives in power. But it seems to me that you have to think the post-donald-Trump. And the United States is 13% of global imports, that means that it remains 87% of international trade with countries that are attached to the multilateral system. The WTO had faults and they were already pointed out, in particular vis-à-vis China and Chinese subsidies. But there is still this attachment to a multilateral system. It should be remembered that the European Union, unlike other countries, is a large country that also has the means to respond to Donald Trump, as China does today. Maybe not in the same proportions, but this is something that other countries cannot do. For example, Vietnam which is targeted by 46% of customs duties initially – which have been suspended, does not have the same ability to respond given the importance of the American market for this country. Therefore, there may be a responsibility of the European Union to respond to this breach opened by Donald Trump in the multilateral trade system.
China changes its negotiator on international trade. Is it a particular signal?
It may be the signal that there is a change, taking into account the fact that one is no longer in the same situation as four years ago. Four years ago, this negotiator managed to find an agreement, where China undertook to buy American products. Which was not far away and not very respected, but that had prevented an escalation. Today, it is the recognition that we are in a fairly different situation, with a much more important escalation. It should be remembered that we are more than 100% customs duties on Chinese imports. And so China surely has a slightly different strategy that is starting to set up, to try to find out how to “descend” the situation.
What about the downward forecasts of the WTO, between 0.2 and 1.5% of global trade growth, are figures that resemble those of the pandemic?
It is less important than the pandemic, and the crisis of 2008-2009. It is an important decline, but again, we have enormous uncertainties. So it is rather orders of magnitude on what could happen. Before Donald Trump’s arrival in power, forecasts were 3% of international trade growth. So we are on a fairly large withdrawal. Afterwards, they will be updated. It is a difficult exercise, it must be done. It’s a bit heroic to do this exercise today for the whole year. But now, it is to give a perspective on the importance of this decline and this rupture at the international level.
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