Is There Hope For Global Trade Yet?

Global trade rose in June for the first time since December on a monthly basis, data released Tuesday by the Dutch government planning agency CPB shows. 

For those who may be new to the series, CPB publishes the data each month on behalf of the European Commission. It comes on a two-month lag, though, which means it wasn’t until June that the world got a comprehensive read on the impact from the virus lockdowns in western economies.

April witnessed a 12% monthly plunge and a harrowing 16% decline on an annual basis, reflecting the impact of the pandemic on international commerce. Although data for May showed a far shallower contraction, it wasn’t until June that the monthly print turned positive. Global trade rebounded nearly 8% that month, CPB said, in the latest update.

Year-on-year, trade was still down more than 10%.

“There was growth in almost all countries, except in Japan, where imports fell even further”, CPB said, in the color accompanying Tuesday’s release. For the second quarter, world trade fell -12.5% on the heels of a -2.7% decline in the first quarter.

The rebound in June is a welcome development, but the headwinds are still gale force. Remember, global commerce came into the pandemic beset with concerns, not least of which was the rising tide of nationalism and attendant revitalization of protectionist trade policies around the world. The pandemic may end up exacerbating those trends, a worry reflected in responses to BofA’s monthly fund manager survey.

Earlier this month, the WTO said merchandise trade likely contracted 18.5% in Q2. The Geneva-based organization’s Goods Trade Barometer (which it describes as “a real-time gauge of trends”) showed activity remained well below trend in June.

Still, the release offered some hope. The body’s June statistics, combined with the latest reading on the Goods Trade Barometer, “suggest world trade in 2020 is evolving in line with the less pessimistic of the two scenarios outlined in the April forecast”, the WTO remarked.

That means we’re looking at “just” a 13% contraction in 2020, versus the truly dour “pessimistic scenario” in which commerce would shrink by nearly a third.

But even as the WTO seems to have written off the “pessimistic scenario”, they were far from “optimistic” last week when discussing June’s performance.

“The heavy economic toll of the pandemic suggests that projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic”, the organization cautioned. “As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect… leav[ing] global trade well below its pre-pandemic trajectory”.