Blaming slower GDP on trade risks missing other perils

Significance

Some of the downside risks the April WEO highlighted have materialised, while the FSR sees higher risks to financial stability. The explanations prioritise trade but many other common and country-specific factors also constrain growth prospects.

Impacts

• Emerging markets (EMs) with firm fundamentals have lower contagion risk than in the past, but growth will increasingly diverge across EMs.
• New trade tariffs are more likely to contribute to sustained slower global growth than to trigger a recession.
• Goods trade is a small share of Chinese and US GDP but US policy uncertainty will hit investment worldwide, damaging productivity efforts.