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Snowballing protectionism still a small risk for now

We still see a gentle rise in protectionism as the most likely outcome this year, rather than a more malign escalation in trade frictions. Such a development would be unlikely to pose a major threat to the ongoing global expansion.

Over the past decade, policymakers have used a variety of non-tariff techniques to help support domestic firms, at the expense of those abroad, without severe global economic ramifications. Optimists might even note that, since 2017, the pick-up in protectionist measures has dropped off, particularly those aimed at the US, perhaps suggesting that Trump’s rhetoric has had some initial success.

But there is a risk that President Trump’s recent decision to up the ante could trigger a full-blown trade war. Global trade tends to be highly concentrated in certain sectors – if tariffs or other significant measures are introduced in these key areas, the spill-overs could be large and increase the risk of escalation.

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