Global trade flows boomed in the 1990s and early 2000s, coinciding with a period of strong economic growth, the founding of the World Trade Organization, the rise of China and other East Asia economies as manufacturing hubs, and relative political calm following the fall of the Soviet Union. But momentum has slowed since, buffeted by factors such as the pandemic, rising geopolitical tensions, war and protectionism; while from 1990 to 2008, global trade volumes rose 6% per year on average, growth slipped to just 3% in the 2010s. And the coming years look set to be no more rosy for the global trade outlook.
Our Consensus Forecasts for the global trade outlook
Our analysts expect real growth in exports of goods and services to pick up this year and next from 2023’s subdued figure. Likewise, nominal merchandise exports should accelerate in 2024 and 2025 following 2023’s contraction. Loosening global monetary policy and an upcycle in global electronics demand will provide support to the trade outlook, despite declining commodity prices. That said, global export growth will remain notably weaker than the 10-year pre-pandemic average. Risks appear to be skewed to the downside: In a recent survey of 61 of our analysts, U.S. trade policy, conflict in the Middle East and between Russia and Ukraine, extreme weather and higher-for-longer interest rates were frequently mentioned as downside risks.
U.S. and EU tariffs on China
As outlined in our latest special report, roughly four-fifths of the analysts that we surveyed expect the U.S. to increase tariffs on China this year or next. Donald Trump—who is currently leading the polls ahead of the November presidential elections—has floated the idea of up to 60% tariffs on Chinese imports, and of imposing a baseline tariff of 10% on all imports from the rest of the world. Political pressure could also force Biden or another Democrat candidate into further tariffs. At the same time, two-thirds of analysts polled see the EU imposing tariffs on Chinese electric vehicles due to the bloc’s desire to protect its large domestic car industry; an EU probe into whether Chinese EV firms have received unfair state subsidies is already underway.
In short, in the coming years, global trade flows are unlikely to experience again the explosive growth they saw up to the late 2000s. This is partly down to the softer overall growth forecast for the world economy. But there has also been a sea change in how nations view international commerce, with the three largest economic blocs—the U.S., China and the EU—all intent on boosting their indigenous manufacturing capability and protecting strategic industries from foreign competition. Proponents of unfettered free trade flows may have the upper hand in the economic argument—globalization has undoubtedly raised living standards—but the political argument is far from being won.
Insight from our analysts
On a Trump election victory, Corficolombiana’s Diego Alejandro Gómez Gutiérrez said:
“If Trump wins the 2024 elections, we can expect a trade policy characterized by a heightened emphasis on nearshoring, aiming to bring manufacturing and production closer to the United States. This approach may involve the implementation of higher import taxes specifically targeting Chinese goods, as seen in previous administrations. Additionally, there is a likelihood of increased efforts to address perceived imbalances in trade relations. Such a policy direction could lead to a higher degree of fragmentation in global value chains as companies reassess and restructure their supply networks to align with the evolving trade landscape.”
On U.S. restrictions on China, EIU’s Nick Marro said:
“The US is very concerned that its existing export controls and other trade restrictions have failed to significantly curb China’s technological advancements, particularly in regards to sophisticated chipmaking. We expect a tightening of existing restrictions, potentially targeting more mature technology in sectors like chipmaking equipment, in order to further pressure China’s semiconductor industry. Other restrictions on artificial intelligence, quantum computing and similar ‘next generation’ industries are likely.”
Our latest analysis
Portugal’s upcoming elections are likely to bring policy continuity.
Germany’s economy contracted notably in Q4.
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