Clyde WTN

Global Trade Update

Despite the economic disruptions caused by COVID-19, worldwide trade kept up pretty well in 2020. East Asian economies accounted for much of the trade resilience, as their early success in pandemic mitigation allowed them to recover faster and capitalise on brisk worldwide demand for COVID-19-related items.

Positive tendencies from the last several months of 2020 became more pronounced in early 2021. The value of worldwide commerce in goods and services increased by roughly 4% quarter over quarter and by 10% year over year in Q1 2021. Importantly, global trade in Q1 2021 was greater than pre-crisis levels, with a 3% rise over Q1 2019.

The robust export performance of East Asian nations continues to fuel the trade rebound in Q1 2021. The value of commerce in products was greater in Q1 2021 than it was before the epidemic, but trade in services remained much below than norms. During the first quarter of 2021, global commerce in COVID-19-related products remained robust.

East Asia and industrialised nations are likely to maintain greater trade growth, while many other countries continue to lag. The value of global commerce in goods and services is expected to reach US$ 6.6 trillion in Q2 2021, representing a year-over-year improvement of around 31% relative to the lowest point in 2020 and approximately 3% relative to pre-pandemic levels in 2019.

Global commerce expands by around 10% year on year and 4% quarter on quarter in Q1 2021.

Goods trade exceeds pre-pandemic levels, with trade in COVID-related industries continuing robust. The trade in services continues to lag.

Exports from East Asian economies are driving the recovery. Trade is recovering more slowly in other emerging regions. Trade between developed nations is improving.

Trade growth is projected to be robust in the second half of 2021, with the total projection for 2021 indicating a 16% improvement from the lowest point in 2020. (19 per cent for goods and 8 per cent for services).

The favourable forecast for 2021 is still heavily reliant on easing pandemic limitations. Nonetheless, fiscal stimulus programmes, particularly in wealthy nations, are projected to significantly boost global trade recovery in 2021.

Several economies are expected to recover sooner and stronger than others. The economies of China and the United States of America, in particular, are projected to be the primary drivers of global growth in 2021. This should benefit nations whose commerce is substantially more intertwined with them (for example, East Asian countries, Canada, and Mexico).

COVID-19, on the other hand, is projected to continue affecting the economy and commerce of many developing nations at least until 2021.

This should benefit nations whose commerce is substantially more intertwined with them (for example, East Asian countries, Canada, and Mexico). COVID-19, on the other hand, is projected to continue affecting the economy and commerce of many developing nations at least until 2021.

The COVID-19 epidemic has created significant uncertainty in many global value chains, giving incentives to reduce segmentation and relocate manufacturing closer to consumers. The continuous creation and implementation of regional trade agreements, as well as ongoing trade conflicts between major economies, may potentially contribute to shifts in global value production patterns.

As part of their post-pandemic recovery plans, governments are expected to implement a wide range of measures. Given the ongoing political tensions between several of the world's leading countries and the present challenges within the multilateral trading system, there is a danger that some of these measures will be trade restrictive.

Furthermore, initiatives toward a more socially and environmentally sustainable recovery process may have an impact on existing global trade patterns.
Policies aiming at reducing carbon leakages, for example, through price adjustments for imports, are thought to have an impact on international trade flows.

Government borrowing to preserve their economy amid the COVID-19 crisis may result in financial instability. Even in the absence of a full-fledged global financial crisis, growing debt and commitments to service it might cause instability.

Any increase in interest rates would put pressure on both public and private borrowing, having a detrimental impact on investments and international trade flows, particularly in emerging nations with limited fiscal policy room.

During COVID-19, consumer behaviour has shifted dramatically. Demand rose in certain industries (e.g., healthcare items, digital services, communication and home office equipment) while falling in others (e.g., transportation equipment, foreign travel). Some of these changes may be permanent, and if so, they will have an impact on demand for foreign goods and services.

Import and export statistics for several of the world's top trade economies highlight the Q1 2021 recovery tendencies. With a few exceptions, most economies' commerce began to revive in the fall of 2020. The substantial improvements, however, are attributable to a low base for 2020, and commerce in several of the main economies was still below 2019 levels. All major economies are experiencing a greater rebound for commodities than for services.

During the first quarter of 2021, China, India, and South Africa performed relatively better than other major economies. China's exports, in example, increased significantly not just in comparison to 2020 norms, but also in comparison to pre-pandemic levels. In contrast, Russian Federation exports remained significantly lower than 2019 averages.

Most industries are benefiting from the current trade recovery. During the first quarter of 2021, commerce rose not just in sectors related to COVID-19 (e.g., medicines, communication and office equipment), but also in the majority of other sectors, such as minerals and agri-food.