The slowdown, and recent decline, of world trade is one of the most troubling developments for the global economy we have seen in a while. World trade rarely decreases, and world GDP always takes a knock when it does.
Over the last four decades, world trade has contracted outright in only two years, and it stalled in one. The 2009 contraction accompanied a contraction of world GDP, the only decline in the IMF’s GDP metric in postwar history. The 1982 contraction coincided with the next-worst GDP growth rate in this period.
The 2001 trade stall lines up with the seventh-worst GDP growth rate in 40 years. The three strongest years for world trade line up with three of the six best years for GDP in this period. Maybe this is a coincidence, but we do not think so. The slowdown in world trade, which dates back to the first quarter of last year, merits your attention.
It is tempting to say that this is the result of the trade war between the United States and China. NBS data put China’s exports to the United States down by $9.0 billion in the first three months of this year; U.S. exports to China were down by $13.2 billion. That annualizes to a loss of $88.7 billion per year, if sustained, or roughly 0.5% of world exports. World export values in this same period were down 2.4%.
The decline in world trade is a lot greater than U.S.-China trade frictions can explain. It worries us when we see world trade decline and we do not have an explanation for it. China’s April trade data show the losses of exports on both sides of the dispute increased. We are on the alert for more bad global economic news in the months ahead if the drop in world trade continues.