Research Briefing | Apr 26, 2021

Global | Rebounding global trade has lots of beneficiaries

Global trade is recovering so strongly that infrastructure seems unable to support it. As shipping costs reach new highs, reports of delays still aren’t subsiding. Nevertheless, most countries manage to fare well in trade, both last year and now that the trade is on the rise again. China was the first to reap the benefits, but strong commodity prices have softened the blow for many vulnerable economies.

Terms of trade have scarred only the oil producers, and even they have now started to recover. Most traditional victims of unfavourable terms of trade during a crisis – developing countries and especially those with high concentrations of exports – have fared well.

Many have also managed to improve their trade balances because the pandemic has put a larger dent in private consumption and imports than in exports. A word of caution is due, given that overreporting exports (to evade taxes) is a known malady of balance of payments and might be exaggerated during the coronavirus crisis.

With China having hardly missed a beat in 2020 and already benefitting from recovering global demand, the question now is: How fast will the advanced economies’ manufacturers catch up? From the data we have, it seems some are seeing a mini-bonanza. For example, Germany’s manufacturing new orders are growing steadily. Others that rely significantly on services exports will need improved health conditions and mobility restrictions this summer. But given that global trade doesn’t include services, it’s likely to keep rising regardless.

 

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