Global Trade Outlook Bleak: UNCTAD

But for the second quarter of this year, the UNCTAD report expects a slowdown in global trade growth, pointing to recently downgraded world economic forecasts and factors such as persistent inflation, financial vulnerabilities, the war in Ukraine and geopolitical tensions.

“Overall, the outlook for global trade in the second half of 2023 is pessimistic, as negative factors dominate the positive,” according to the report.

The war in Ukraine, the decoupling of the United States-China trade interdependence and the consequences of Brexit have played a significant role in shaping key bilateral trade trends
during this period.

The report illustrates the ongoing decline in trade interdependence between the United States and China. It shows that over the past year and a half, the United States has become relatively less significant as an export market for China and the United States' dependency on China as a supplier has decreased even further.

Mixed Growth

The report shows that merchandise trade growth has been mixed among the world’s major economies during the last four quarters. Brazil, India, the United States and the European Union saw significant increases in both imports and exports.

But on a quarter-over-quarter basis, trade trends for major economies were more subdued between January and March 2023, and in many cases negative. The notable exception is significant growth in exports from China and India.

On a yearly basis, all regions saw international trade grow, except for the Russian Federation and central Asian economies. But the growth in the East Asian region has been significantly below average.

On a quarter-over-quarter basis, the first quarter of 2023 witnessed a decline in the value of trade in most regions, except for the Pacific region, North America and Africa, which experienced marginal growth. Intra-regional trade during the same period followed similar patterns. But notably, trade within Africa increased by 3 percent, outperforming other intra-regional trade.

Over the last five quarters, the report found that the geographical proximity of international trade remained relatively stable, suggesting a lack of significant nearshoring or farshoring trends, at least on average. “Friend-shoring” has been on the rise since late 2022, characterized by a reorientation of bilateral trade flows to prioritize countries that share similar political values.

Global trade trends over the past four quarters were influenced by the energy sector, where rising prices resulted in higher trade values, until an 11percent quarterly drop between January and March 2023. Other sectors that experienced trade increases were agri-food products, apparel, chemicals and road vehicles. Conversely, trade declined in office and communication equipment, as well as transport, where downward trends continued into the first quarter of 2023.