World trade is expected to decline in the next three months, although mildly, continuing a downward trend recorded for several quarters since mid-2018, according to the latest DHL Global Trade Barometer (GTB).
The overall decline was driven by significant losses for both air and containerized ocean trade, which are the barometer’s two fundamental constituents. Air trade declined by -6 to 49 points, and containerized ocean trade by -8 points to 48 index points.
These losses led to an overall drop in the world trade outlook by -8 points, to a new index value of 48.
“Amidst rising US-Chinese tensions, the slightly negative outlook for global trade for the third quarter of 2019 does not come as a complete surprise,” said Tim Scharwath, CEO of DHL Global Forwarding, Freight. “The latest GTB clearly illustrates why trade disputes create no winners.”
The report explained that the still rather mild global trade contraction is due to the fact that during trade conflicts, trade flows do not merely dry out. “Instead, trade routes and supply chains shift into other countries. On a global scale, this partly offsets the negative effects of trade tensions between countries.”
Nevertheless, some major economies such as Germany continue to record positive trade growth. And from a year-to-date perspective, world trade growth has still been positive.
“Hence, we remain confident in our initial prognosis that 2019 will be a year with overall positive, but slower trade growth,” said Scharwath.
Growth is weakening in the key drivers of the world economy, commented Eswar S. Prasad, professor of trade policy and economics at Cornell University in New York.
This is shown by a cooling of U.S. growth and financial market sentiment being hurt by trade tensions. The Chinese government’s stimulus measures appeared to be stabilizing growth, but persistent trade tensions are again dragging down growth momentum in China. The German growth revival looks fragile while India’s growth has hit the skids, with rising doubts about the prospects of major economic reforms.
“A synchronized slowdown of the world’s major economies could affect trade volumes, if the uncertainty continues to dampen consumer demand and business investment,” Prasad warned.
The U.S. saw by far the heaviest losses among all GTB index countries, with its outlook declining by -11 points to 44, said the report. Those losses were mainly driven by a negative outlook for major export categories.
China scored second in terms of losses, with a decline of -7 points to 49—an index value one point below stagnation. China’s negative outlook was primarily driven by declining imports in several categories, combined with just minor overall export growth.
“Given the US’ and China’s large contribution to the global index, their diminishing trade growth rates contribute to a large extent to the projected global decline,” said the report.
In addition to China, the East-Asian economies of Japan and South Korea record sluggish trade momentum. The index for Japan has fallen by -7 points and now sits at exactly 50, which indicates stagnating trade dynamics. South Korea is the third GTB country with a forecasted decline in trade growth for the next three months.