Anyone keeping tabs on global trade over the past few months would agree that there has been an appreciable downturn in global trade. Growing trade tensions and this slow global economy led to experts from the World Trade Organization to downgrade forecasts surrounding trade growth in 2019 and 2020. The total trade volume globally was predicted to rise by 1.2% in 2019, although realities indicate a slower trend. The predictions for 2020 show a 2.7% projected increase. However, experts have stated that the reliability of this projection depends strongly on the return of trade relations back to normalcy.
According to the Director-General of the World Trade Organization, Roberto Azevêdo, trade conflicts contributed majorly to the uncertainty in global trade. According to him, “the darkening outlook for trade is discouraging but not unexpected. Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards,”. Commenting on the possible fallouts of this uncertainty in global trade trends, Azevêdo further stated, “job creation may also be hampered as firms employ fewer workers to produce goods and services for export.”
Fall in US Imports
Another major event associated with the downturn in global trade is the seeming collapse of imports in the U.S. Imports and exports in the U.S. are shown to have dropped to the lowest levels possible in recent times. Several stakeholders have associated this with President Donald Trump’s tariffs.
In August 2019, a steep decline in imports unexpectedly caused a narrowing in the merchandise trade deficit from $73.1 billion to $70.4 billion. A survey by Bloomberg, compared with data obtained from the Department of Commerce confirmed this. Exports also declined by 3% to $135.9 billion, which was the lowest value recorded in over a year and a half.
In November 2019, imports to the United States dropped by USD 2.5 billion to USD 251.7 billion, the lowest recorded since October 2017. This drop was led mostly by a drop in the purchases of capital goods which went down by USD 1.2 billion. Imports of consumer goods also fell by USD 1 billion.
Crude oil imports dropped to 166.4 million barrels, another significant drop as this was the lowest since February 1992. On the other hand, purchases of automotive vehicles, engines, and parts went up by USD 1.1 billion; and the imports of services also went up by USD 0.4 billion.
The drop in import in the U.S. cut across all major partners: Canada (-11.8 percent); the EU (-11.2 percent); China (-9.2 percent); Mexico (-6.0 percent); Japan (-1.0 percent); and lastly Brazil (-0.3 percent).
These figures might just be corroborating indications that the trade policies of President Trump are challenging companies in America. Some other data have revealed that the tensions with China also reduced business investment and slowed down the pace of hiring.
However, for 2020, world merchandise trade volume is predicted to grow by 2.7% with a GDP growth of 2.5% even though trade tensions and overall trade policy uncertainty continue to pose the greatest risk to all these forecasts.
