World trade in goods reaches new heights
|Exports of goods: Asia rebounds first
World trade of goods in volume rose above pre-Covid-19 levels during the winter months, era-sing during the 6-month period the drop-off reported in Q1 2020 (see chart 1). This V-shaped recovery underscores the unique nature of the current crisis, with demand staging a major catching-up movement and an industrial fabric that is more resilient than during previous crises. Following the 2008 global financial crisis, it took three years before world trade of goods returned to pre-crisis levels. Moreover, despite the abrupt downturn in H1 2020, exports declined 5.0% in volume last year, which is less than the 12.5% decline reported in 2009.
After bottoming out in May 2020, global exports have rebounded by 25% (see table 1). Yet this robust recovery masks rather large discrepancies between regions, which is largely due to the lag in the pandemic’s propagation between countries. China was the first to go in lockdown and to curb the pandemic, which means that it was able to restart activity, exports, and imports earlier than the rest of the world. In February, European exports and imports were still slightly below year-end 2019 levels. The lag in US exports was even bigger (after plummeting sharply in H1 2020), but imports have already risen above year-end 2019 levels.
Nonetheless, in both Europe and the United States, trade volumes should rise above pre-crisis levels this spring as the pandemic eases and restrictions are lifted.
For the moment, with Western countries lagging behind China, the capacity of Chinese industries to adapt to changes in world demand has enabled China to consolidate its share of the global export market for goods (see chart 2), to the detriment of the industrialized economies, whose export market share fell below the 60% threshold. Yet this is only a temporary phenomenon. With the acceleration of the US economic recovery this winter and the recovery taking shape in Europe this spring, these countries are bound to regain market share. Note that Chinese exports as a share of global exports had been declining between 2015 and the outbreak of the global pandemic, squeezed by structural factors such as higher production costs.
Outlook for H2 2021
At the global level, trade logically should continue to strengthen over the course of 2021 as vaccination campaigns progress and economic stimulus packages – foremost of which is the massive American Rescue Plan – bolster global activity. Several leading indicators highly correlated to world trade continued to improve in Q1 2021. In April, the global PMI index for export orders rose to 54.7, the highest level since May 2010 (see chart 3). A similar upward trend can also be seen in terms of new export orders in Taiwan (see chart 4). This upturn is also corroborated by the World Trade Organization (WTO): in its latest outlook issued in March, the WTO expects global trade to rebound by 8% in 2021, after contracting 5.3% in 2020. That said, there could be a downward shift in global exports once the catching-up movement of demand has eased off.
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