The Economist September 12th 2020 pp62 |Finance & economics|Global Trade| “Down but not out” “Commerce has shown a strange resilience to covid-19”
At ~-20% YOY, world merchandise trade has fallen to just above levels observed at the financial crisis of 2007-2009 a time when world GDP dropped 0.1%. Current estimates are that for the year 2020 global trade will drop only by 10% but global GDP could fall by nearly 5% or 50-fold worse than 2009.
Why the difference between then and now? After the mortgage meltdown of 2007-2009, consumers stopped buying big ticket items like vehicles while for the pandemic it is services like the cinema and restaurants that have been hit hard. Besides surging demand for covid-related safety-PPE etc, consumers and institutions have responded to the pandemic by stocking up on IT-PC, Laptops, Pads, connectivity to acccomodate learning and working from home. Seeking better control of travel options for leisure, car sales have rebounded strongly as well. Central banks have also helped as by exercising liquidity measures. Another contributing factor, manufacturing reopened quickly in Germany and China to meet increased demand from America leading to a record trade deficit with China of $80B. “The imbalance is ominous…the Phase One trade deal between American and China”… has been derailed by these events. “After a robust July there are signs that the rebound is slowing in August. “