I’ve waited patiently for two months and it’s finally here. The Dutch government planning agency CPB is out with the April vintage of their World Trade Monitor.
The CPB publishes this each month on behalf of the European Commission. The problem is that it comes on a two-month lag, which means the last two readings (for February and March) didn’t reflect the “real” scope of the damage to global commerce from the pandemic lockdowns.
Even so, the readings from those two months were hardly inspiring. In fact, March’s YoY decline was the largest since the GFC by a long shot. On a MoM basis, world trade shrank for three months straight headed into April.
So, that’s the setup. (And yes, I’m guilty of burying the lede here.)
The latest data, out Thursday, shows world trade by volume contracted at an epic pace in April. Specifically, the CPB’s monitor betrays a 12.1% MoM plunge. Exports fell by nearly a quarter (-23%) in the eurozone and the US, by -21% in Latin America, and by -14% in Japan.
On a YoY basis, the global decline is an astounding 16.2%.
While it’s true that this was “expected” (just like every other dour data print covering the months during which lockdowns were in effect for developed economies), the important thing to note is that the pandemic is seen impacting the way in which nations approach trade going forward.
The world has learned that stagnating middle-class incomes in advanced nations aren’t the only drawback to globalization. Increasingly interdependent economies, far-flung supply chains, just-in-time management and interconnected financial markets mean that when one country sneezes, the rest of the world catches cold – or, in this case, deadly viral pneumonia.
That is a lesson that will not soon be forgotten. Unfortunately, political opportunists with questionable motives will invariably cite this episode as a poignant example of why hyper-globalization is undesirable. Peter Navarro, for example, has already done just that.
Respondents to BofA’s closely-watched global fund manager survey overwhelmingly believe an aversion to globalization will be a defining feature of the post-COVID reality.
“Trade volumes are set to make a gradual recovery as lockdown measures ease around the world, but there are headwinds from COVID-19 precautions at ports, as well as export restrictions on medical goods and some food products”, ING said Thursday, commenting on the latest figures from CPB.
Over the past two weeks, China has moved to restrict imports of salmon and meat after an outbreak in Beijing caused a stir, and there are new rumblings from the Trump administration around increased tariffs on the EU and a lobster battle appears to be looming.
“The severity and global reach of lockdown measures suggests that Q2 will be the low point of 2020 for world trade volumes, but this depends on how much openness economies can sustain without needing to go into lockdown again”, ING went on to write, cautioning that “even if the recovery starts from next month, the steep fall into April from already low volumes in Q1 indicate world trade is on track to be more than 10% lower than in 2019”.