The World Trade Organization has slashed its forecast for trade growth this year by more than half, warning the slowdown could hit living standards and jobs.
The WTO said it expected trade volumes to grow by just 1.2% in 2019, down from the 2.6% it predicted in April.
It also cut its global economic growth forecast from 2.6% to 2.3%.
It blamed the downgrades on slower growth in major economies, trade wars and ongoing uncertainty over Brexit.
In the first half of 2019, world merchandise trade increased by just 0.6%, a substantial slowdown from earlier years.
Citing a “high degree of uncertainty”, the agency warned that expansion in world trade volumes could slow to just 0.5% growth by the end of the year. Even a 1.2% rise would mark the lowest rate in a decade.
WTO director-general Roberto Azevêdo said businesses are delaying investments and hiring amid the uncertainty, squeezing growth and putting at risk better living standards.
“The darkening outlook for trade is discouraging but not unexpected,” he said. “Resolving trade disagreements would allow WTO member [states] to avoid such costs.”
The revised WTO forecast comes as uncertainty over Brexit has hit the economy in Europe and just weeks before the US and China are scheduled to meet for another round of trade talks.
The two countries have already raised tariffs on billions of dollars of each others’ exports. The US is due to impose more tariffs on Chinese goods this month.
Meanwhile US President Donald Trump has also clashed with the EU over trade, while a new trade agreement between the US, Mexico and Canada has yet to be approved in Washington.
US manufacturing data released separately on Tuesday showed the lowest activity in more than 10 years – a report that sent US stock exchanges lower.
Analysts said a swift resolution to many of the trade conflicts was unlikely, pointing to previous trade disputes that often lasted years.
“History suggests it can take a long time for trade conflicts to end and for tariffs to be removed, even for smaller conflicts that go through the official channels,” analysts for Goldman Sachs wrote in a report issued last week.
The WTO said it expected growth in trade volumes to accelerate to 2.7% in 2020, but cautioned that any pick-up depends on a return to “more normal” trade relations.
“Risks to the forecast are heavily weighted to the downside and dominated by trade policy,” the WTO said in its update. “Further rounds of tariffs and retaliation could produce a destructive cycle of recrimination. “