The World Trade Organization has warned that the outbreak of tariff wars pose a threat to jobs and living standards as it slashed its forecast for trade growth during 2019.

The Geneva-based WTO said it had more than halved its growth forecast for trade in goods this year from 2.6% to 1.2% after a summer of escalating US-China protectionism, a slowdown in global growth and fears of the impact of a no-deal Brexit.

With the WTO’s ability to resolve trade disputes between its member states under threat, the organisation’s director general, Roberto Azevêdo, said the hostile environment was discouraging firms from spending on new capital.

Q&A What is the China-US trade war about? Show The roots of the dispute come from US president Donald Trump’s “America first” project to protect the US’ position as the world’s leading economy, while encouraging businesses to hire more workers in the US and to manufacture their products there. Trump complains of a large trade deficit with China, which he views as a symbol of the US’s decline as a manufacturing powerhouse. Chinese imports to the US totalled $539.5bn last year, while $120.3bn was sold the other way – leaving a trade deficit of $419.2bn. The president has accused Beijing of “unfair” trade policies, including allowing the theft of US companies’ intellectual property. The threat of import tariffs on Chinese goods is being used as leverage in talks where Trump is seeking changes to Beijing’s trade policy. Tariffs have been imposed by Washington on some Chinese goods sold in the US for about a year. They came on top of broader tariffs used by Trump that have hit China and other trading partners such as the EU, Canada and Mexico, on goods including steel and aluminium. In May 2019 the US president further ratcheted up existing import tariffs of 10% on $200bn (£153bn) of Chinese goods sold in the US to 25%, hitting everything on a long list of products. Trump has previously warned that 25% tariffs could be slapped on a further $325bn of goods – which would mean all Chinese imports being covered by tariffs. However, talks in November 2019 aimed at easing tensions were welcomed as the beginning of a thaw in the trade war between the two nations. Richard Partington and Jasper Jolly

“The darkening outlook for trade is discouraging but not unexpected. Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards,” Azevêdo said. “Job creation may also be hampered as firms employ fewer workers to produce goods and services for export.”

High-level talks between the US and China are due to resume in Washington this month in an attempt to settle a dispute in which the world’s two biggest economies have placed tariffs on more and more products.

At the same time, the US has been blocking the appointment of new judges to the WTO body that decides if a country’s appeal against a ruling in a trade dispute should be upheld. The body requires three judges to operate and by December will be down to one.

“Resolving trade disagreements would allow WTO members to avoid such costs,” Azevêdo said. “The multilateral trading system remains the most important global forum for settling differences and providing solutions for the challenges of the 21st-century global economy. Members should work together in a spirit of cooperation to reform the WTO and make it even stronger and more effective.”

The WTO said the outlook had darkened since its last forecast in April this year, adding that its prediction of a bounce-back in trade growth to 2.7% next year depended on the trade wars coming to an end.

A high level of uncertainty meant trade growth this year was likely to be in a range from 0.5% to 1.6%, with the risk that it could be even lower should trade tensions continue to build.

The WTO said risks were “heavily weighted” to the downside and dominated by trade policy.

“Further rounds of tariffs and retaliation could produce a destructive cycle of recrimination, while shifting monetary and fiscal policies could destabilise volatile financial markets,” the WTO said. “A sharper slowing of the global economy could produce an even bigger downturn in trade. Finally, a disorderly Brexit could have a significant regional impact, mostly confined to Europe.”