history has shown that the trend towards a more open and liberal world order can reverse, as seen in the interwar period. this may now be happening again. brexit, the uk ’ s exit from the eu, may take place a few weeks from now, and is the first major setback for european integration in several decades. the scaling back of tariffs has stopped, and new tariff barriers are being erected. recent barriers include new measures to prevent foreign investment in national infrastructure. at the same time, the wto ’ s position has weakened, making it more difficult both to resolve disagreements and carry out needed regulatory reforms. last year was marked by trade tensions between the united states and china. the united states raised tariffs on a range of imports, and china retaliated in kind. the immediate effects of increased tariffs are higher selling prices on goods liable to tariffs, adversely affecting consumers and producers who rely on imported input goods. we have also seen that growing uncertainty is dampening business ’ investment appetite. the tariff increases have already had an impact on chinese and us gdp. norges bank economic perspectives 14 february 2019 the negative effects of the measures taken so far are fairly moderate ( chart 3 ). the danger is that trade tensions deepen, and that retaliatory measures lead to a negative spiral. more countries could be drawn into the conflict, with an even broader rise in tariff rates. in that case, not only the united states and china would be affected, but also europe and the rest of the world. chart 3 trade tensions curb world gdp. estimated effect on gdp after three years. 1 ) percent 0. 2 approved measures discussed measures 0. 2 gradual global tariff increases – 0. 2 – 0. 2 – 0. 4 – 0. 4 – 0. 6 – 0. 6 – 0. 8 – 0. 8 – 1 – 1 – 1. 2 – 1. 2 – 1. 4 – 1. 4 us china euro area globally 1 ) the effects are based on model estimates from the imf and norges bank. approved measures are described in the box “ trade conflicts create uncertainty ” in monetary policy report 3 / 18. discussed measures include a 25 percent tariff on all us imports from china and a 25 percent tariff on us imports of cars and car parts, in addition to retaliatory measures by countries affected. gradual global tariff increases imply a 1 percentage point annual increase in tariffs on all imported goods in all countries over the coming years.

agency had had such tools on september 16, they could have been used to put aig into conservatorship or receivership, unwind it slowly, protect policyholders, and impose haircuts on creditors and counterparties as appropriate. that outcome would have been far preferable to the situation we find ourselves in now. second, the aig situation highlights the need for strong, effective consolidated supervision of all systemically important financial firms. aig built up its concentrated exposure to the subprime mortgage market largely out of the sight of its functional regulators. more - effective supervision might have identified and blocked the extraordinarily reckless risk - taking at aig - fp. these two changes could measurably reduce the likelihood of future episodes of systemic risk like the one we faced at aig.