Global trade could be left well below its pre-pandemic trajectory

Global trade could be left well below its pre-pandemic trajectory

World merchandise trade is likely to register a historic fall in the second quarter of 2020, according to the World Trade Organization (WTO) Goods Trade Barometer, with the strength of any recovery remaining highly uncertain.

The real-time measure of trade trends fell to a reading of 84.5, which was 15.5 points below the baseline value of 100 for the index, and 18.6 points down from the same period last year.

The reading – the lowest on record in data going back to 2007, and on par with the nadir of the 2008-09 financial crisis – is broadly consistent with WTO statistics issued in June, which estimated an 18.5% decline in merchandise trade in the second quarter.

The June statistics also implied a 14% drop in global merchandise trade volume between the first and second quarters of this year. This estimate, together with the new Goods Trade Barometer reading, suggest world trade in 2020 is evolving in line with the less pessimistic April forecast, which projected the volume of merchandise trade this year would contract by 13% compared to 2019.

The exact extent of the fall in trade will only be confirmed later this year when official trade volume data for the period from April to June becomes available, the WTO says.

However, as WTO economists warned in June, the heavy economic toll of the Covid-19 pandemic suggests the projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic.

As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect. This would leave global trade well below its pre-pandemic trajectory, according to the WTO.