Issue Trade policy uncertainty and protectionism as the dominant downside risk to global growth

Summary

Major international institutions reviewed by KISDI regard uncertainty over trade policy and geopolitical tension as the largest threats to growth, and judge the balance of risks to be tilted to the downside. Uncertainty about trade rules is itself described as a negative demand shock, because it leads firms to postpone investment and dampens economic activity. Further tariff increases or retaliation could shrink global trade and investment and weaken consumer sentiment. The IMF warns that protectionist steps would disrupt global supply chains and lower productivity, while the OECD points to export controls and tariffs on critical goods as a source of serious supply chain damage. The World Bank likewise sees rising trade tension as a major factor that could slow world growth.