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Although the World Bank and other organizations anticipate
a moderate global economic recovery in 2017, risks to the forecast are tilted to the downside, not least because of policy uncertainty around trade in the major economies.
against imports, to the 20 percent border tax that President Trump threatened to impose on Mexican goods entering the United States. In sum, one coun- try’s “legitimate policy to nurture domestic produc- ers” is another’s “egregious trade restriction.”
Most economists who study global trade agree that trade barriers reduce aggregate output and threat- en to damage all the involved economies should a trade war ensue. Conversely, research shows that a reduction of tariffs from one side alone can raise growth rates of all affected nations.
BREXIT BUMP
The first protectionist shock in the past year was the United Kingdom’s vote in June 2016 to leave the EU, although the impact is not yet clear. Restricting the free movement of people, a form of protection-
ism, was central to the vote. Nevertheless, Prime Minister Theresa May has insisted that the UK is eager to sign trade deals with other countries. Much depends on the agreement that the nation negoti- ates with the EU; a “hard” Brexit that leaves the UK locked out of preferential trade deals with the EU27 would have negative impacts on the British economy, but the long-term consequences are still murky.
From the point of view of emerging markets, Brexit may not be very meaningful; emerging mar- ket exposure to trade with the UK is not very high. On average, emerging markets send only 3 percent of their exports to the country. The nation is the second-largest export market for Turkey, but only 7 percent of Turkish exports are destined for the UK Any negative impact Brexit might have on emerg-
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