Category Archives: Global trade

19/8/20: The VUCA World of World Trade


WTO projections for global merchandise trade by volume:

Let's take a closer look. Optimistic scenario is for a 13% y/y drop in merchandise trade flows. Pessimistic one is for a 30% drop. Swing is 17 percentage points. These are not forecasts, but are uncertain guesses. We are in a VUCA world, folks.

Let's take a second look: COVID19 shock will be permanent (new trend line post-recovery is permanently below old trendline and flatter) with a minor impact post-2022 that will compound over longer period of time. In pessimistic scenario, the impact appears to be also permanent, but seriously severe.

On a linear trend projection, pre-2008 consistent trend would have left us at around 155 index reading in 2022. 2009-2019 trend would have gotten us to around 122 index reading. Optimistic scenario would leave us around 119 in 2022; pessimistic - at around 95. Wait... optimistic gap for COVID19 and GFC impacts to no GFC and no COVID19 impact is... 33 points! One third of 2015 annual level of trade activity. GFC but no-COVID19 gap to pre-2008 is between 36 points and 60 points. 

And the final look: notice 2019 line... it is virtually flat. As WTO notes (see Chart 4 here: there was, basically, no growth in trade in 2019, before the COVID19 hit. 

We are in a VUCA world, folks.

26/6/20: Trade Restrictions: European Companies

BOFIT newsletter out today highlights the scale of restrictive trade measures applicable to the EU exporters across a number of significant markets:

Of eleven countries included, three managed to lower trade and investment barriers applying to the EU companies over 2017-2019 period, two countries had unchanged barriers, and six showed increasing barriers to trade and investment. In a way, this reflects a shift away from trade and investment globalization focus on the last three decades toward more regionalized and even protectionist policies.

COVID19 pandemic is likely to accelerate this trend.

16/10/19: Ireland and the Global Trade Wars

My first column for The Currency covering "Ireland, global trade wars and economic growth: Why Ireland’s economic future needs to be re-imagined":

Synopsis: “Trade conflicts sweeping across the globe today are making these types of narrower bilateral agreements the new reality for our producers and policymakers.”

19/8/19: Import Zamescheniye: Replacing Imports with Imports in the Age of Trade Wars

Trump trade wars have led to increasing evidence of substitution by Chinese exporters to the U.S. with exports via third countries and supply chain outsourcing from China to other destinations. While direct evidence of these trends is yet to be provided (data lags are substantial for detailed flows of goods across borders) and is never to be treated as fully conclusive (due to differences in trade goods designations), here is some macro-level snapshot of latest data on U.S. imports shares for selective countries:

The chart above shows that based on trends, U.S. imports arrivals from China are down in 2017-2019, and they are up, significantly for Vietnam and Taiwan, with less pronounced evidence of imports substitution from other Asia-Pacific countries.

Given several caveats (listed below), the above chart is a 'messy' one:

  1. Supply chain substitution takes time and may not be fully reflected in the 2018 data, or to a lesser extent, in 2019 data to-date; and
  2. The above chart is based on monthly frequency data, which is volatilion (e to begin with.
With these caveats in mind, here is a chart based on annualized data:

Now, it is easier to spot the trends:
  • China exports to the U.S. are down, sharply, especially considering pre-Trade Wars averages against Trade Wars period 2019 averages;
  • Vietnam, Taiwan and Mexico are major channels for trade/import substitution (using Kremlin's term "import zamescheniye").
  • Japan and Thailand are smaller-scale winners.
  • Malaysia and Indonesia are basically static.
Now, historically, China has been beefing up its corporates' use of Vietnam, Thailand, and Mexico as platforms for supply chain diversification, which is consistent with the data responses to the Trade Wars. Indonesia and Malaysia are two surprises in this, although both experienced uptick in FDI from China in late 2018, so the data might not be showing these investments, yet.

6/4/19: Industrial Production and Global Trade are Tanking

The great convergence of simultaneously declining global trade flows and industrial production:


The trend is also evident from the global manufacturing and composite PMIs (see and

Note the range bounds for two periods (pr-GFC and post-GFC) in the first chart above.