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— This is the script of CNBC's news report for China's CCTV on June 03, 2019, Monday.
Among the many industries that are warning of escalating global trade tensions is the airline industry. At the annual three-day IATA summit, which ends today in Seoul, South Korea, IATA has forecast that rising global trade friction and soaring oil prices will continue to drag down airline profits this year
Global airline profits will fall further to $28 billion in 2019, according to the report from IATA, what does that data mean? On the one hand, this is more than a 20% cut from the $35.5 billion profit forecast the association released last December. On the other hand, the figure is about $2 billion lower than the $30 billion or so in global airline profits last year
The association says the aviation industry is being hit by an upgrade in global trade
Alexandre de Juniac , CEO & Director General, IATA
The complete stop on the evolution of international trade has a major impact on trade flows and on our cargo business. It has significantly impacted our outlook and it's clear that this stop in the evolution in international trade comes directly from trade wars and protectionist measures.
At the annual meeting, airlines and aircraft manufacturers also complained about rising trade friction around the world. Airbus, for example, warned about a dispute between the United States and the European Union over aircraft subsidies, saying tit-for-tat tariffs would hit supply chains and consumers
We know that one of the major trade disputes between the United States and the European Union falls on aircraft subsidies, Trump said in April this year that because the EU illegal subsidies to Airbus, the United States will levy $11 billion tariffs on European products, And the EU is not backing down, releasing a $20 billion worth of potential tariffs on American products.
Christian Scherer, Chief Commercial Officer of Airbus told CNBC that this kind of tit-to-tat tariffs defies economic logic and will ultimately hurt consumers
Christian Scherer, Chief Commercial Officer, Airbus
what would immediately happen would be retaliation, trade barriers going up, the price of aeroplane increases, which means airlines have higher costs which they then pass on to the consumer, and then everything slows down. So that inefficiency induced by this posture our American friends are taking is potentially very very damaging for everyone in our industry."
All of the above shows the aviation industry is facing challenges on back of escalating global trade dispute. But we have to know, apart from aviation, there are still many other industries are experiencing the same slowdown, so many international institutions lower their expectation to global economy for this year and next year.
At the end of last month, for example, the United Nations cut its global growth forecast for this year and next. It cut its forecast for this year to 2.7 percent from 3 percent in January, citing trade tensions, economic policy uncertainty and waning business confidence
The OECD also cut its forecast for global GDP growth this year by 0.8 percentage points from last year's estimate of 3.9 per cent to 3.1 per cent, while it said trade tensions were already a drag on the global recovery and would continue to threaten investment and growth
In addition, the IMF has cut this year's economic growth forecast to 3.3%, and it also becomes the lowest forecast since the financial crisis. Now the uncertainty caused by rising global trade friction is affecting the global economy. In this uncertain environment, few industries and countries are immune. We will keep an eye on this issue.