Markets trade

World Trade Just Collapsed An Epic 16%

Up in smoke.

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”.


8 comments on “World Trade Just Collapsed An Epic 16%

  1. runamok says:

    Man. This is all too bad. Seriously. This is a lot of economic activity and wealth that will not be realized. It was ours, collectively as nations and peoples, to lose. Obviously lots of problems and questions about the old system being able to adapt and reform itself (inequality, boots on throats, climate change, etc). Will we ever figure how to have abundance and get along for the long term, to be able to leave the world a better place than we found it. Sigh.

    • John3D says:

      Simply answered; no we won’t. Government, religion and economic systems are just a symptom of the real problem – human nature. I have no idea how you fix that unless sapiens are not the end of evolution.

      • calh0025 says:

        I suspect this is the crisis of the extension of the 150 person human network via proxy valuation system we call capitalism. Capitalism and for that matter communism are predicated on infinite growth potential. However reality is smacking us in the face and saying we’re hitting an upper boundary with the given technology. Movement to a sustainable valuation system that values resilience is the solution. It doesn’t have a name yet that I know of or a definition but my closest guess would be a model based around maximizing human welfare and access to resources. Money disappears as the primary measure of success and becomes relegated to being a tool. I do not think any outcome is hard wired into humanity other than attempting survival.

        • alt says:

          Humanity always had to balance altruism against the survival instinct. The former is taught, the latter hardwired. Uncontrolled instinct runs amok when education is lacking.

  2. Mr. Lucky says:

    Reading these comments heightens the irony of the increasing ink spilled on the idea that humanity is about to enter on a time where anyone with lots of money will be able to live forever and send their consciousness to the stars. If I were on one of those stars I sure wouldn’t be holding my breath for that outcome, especially if they get their news from FOX Interstellar Report.

  3. John Banjo says:

    The situation and future appears bleak for sure. Ironically I believe the majority of human beings deep down want peace and harmony within a balanced sustainable economy, with a cared for environment and planet. Unfortunately greed leads to ruthless power and control which then utilizes mass communication to play on human fears and differences of the masses to produce the current warlike and distrustful situation. And of course weapons of mass destruction in the hands of the greedy and powerful do not help this situation or provide hope for positive change and progress. My two cents …

  4. You think these pandemics occurring at an increased frequency are natures way of returning humans to a sustainable level for the planet?

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Skip to toolbar