Return of Global Trade Growth, but Poor Outlook through 2023
Global trade in goods and services recovered between January and March 2023 after falling for two straight quarters. However, the outlook for the remainder of the year is dismal.
According to the most recent Global Trade Update from UNCTAD, which was released on June 21st, trade growth was favorable during the first quarter of 2023 for both goods and services. Following the slump in the second half of 2022, both the volume and value of global merchandise trade increased.
Compared to the last quarter of 2022, the first three months of 2023 saw an increase in goods trade of 1.9%, or nearly $100 billion. Additionally, the value of global services trade rose by roughly $50 billion, or 2.8%, over the previous quarter.
The UNCTAD nowcast predicts a decline in global trade growth for the second quarter of 2023, citing recently lowered world economic estimates as well as elements including persistent inflation, financial vulnerabilities, the war in Ukraine, and geopolitical concerns.
“Overall, the outlook for global trade in the second half of 2023 is pessimistic, as negative factors predominate the positive,” the research states.
Rising trade concentration and “Friend-shoring”
A lack of discernible nearshoring or farshoring tendencies, at least on average, is suggested by the relatively consistent geographic closeness of international trade over the past five quarters.
According to the research, “friend-shoring”—a practice wherein bilateral economic flows are reoriented to give priority to nations that share similar political values—has been more prevalent since late 2022.
Key bilateral trade developments during this time have been significantly shaped by the conflict in Ukraine, the decoupling of US-China economic interdependence, and the effects of Brexit.
The paper states that “concurrently, there has been a decline in trade partner diversification, implying that global trade has become more concentrated among major trade relationships.”
The analysis shows how trade dependency between the US and China is continuing to shrink. It demonstrates how the United States has diminished somewhat in importance as a market for Chinese exports during the previous 1.5 years. The United States’ reliance on China as a supplier has declined much further throughout this time.
Various trade results among the main economies
According to the report, over the past four quarters, growth in global major economies’ merchandise trade has been uneven.
Significant rises in imports and exports were observed in Brazil, India, the US, and the EU.
However, between January and March 2023, trade patterns for the major economies were generally more muted and negative on a quarterly basis. Significant growth in exports from China and India stands out as the noticeable exception.
Trade trends in the region
Except for the economies of the Russian Federation and central Asia, every region had an increase in global commerce every year.
However, East Asia’s growth has lagged far below the global average.
The value of trade decreased in most regions during the first quarter of 2023 on a quarter-over-quarter basis, with the exception of the Pacific region, North America, and Africa, which saw little rise.
During the same time period, intra-regional trade followed comparable trends. Unsurprisingly, though, trade inside Africa grew by 3%, outpacing other intra-regional trade.
How different sectors perform
Energy prices increased trade values throughout the previous four quarters, influencing global trade trends, until an 11% quarterly decline between January and March 2023.
Road cars, clothing, chemicals, and agri-food products were among the other industries that saw a rise in trade.
In contrast, trade decreased in the areas of transport and office and communication equipment, where decreasing trends persisted throughout the first quarter of 2023.