Although global trade in goods and services rebounded between January and March 2023 after falling for two consecutive quarters, the outlook for the rest of the year remains weak.
The spread of the Coronavirus has had significant repercussions on the global economy and on the movement of global trade as a result of the closures that occurred in countries and at the borders between them. Today, trade faces a new challenge due to a sharp decline in global economic growth and geopolitical conflicts.
According to the latest update of the World Trade Report from the United Nations Conference on Trade and Development (UNCTAD), trade growth was positive during the first quarter of 2023 for both goods and services. Following the recession in the second half of 2022, the volume and value of global merchandise trade increased.
Compared to the fourth quarter of 2022, the first three months of 2023 saw merchandise trade increase by 1.9 percent, or nearly $100 billion.
In addition, the value of global services trade increased by about $50 billion, or 2.8 percent, compared to the previous quarter.
The UNCTAD report predicts a decline in global trade growth for the second quarter of 2023, citing recently downgraded global economic estimates, as well as elements including persistent inflation, financial vulnerabilities, the war in Ukraine, and geopolitical concerns.
“Overall, the outlook for global trade in the second half of 2023 is pessimistic, with negative factors overshadowing positive ones,” the report says.
According to the report, “supporting friends” — a practice in which bilateral economic flows are redirected to prioritize countries that share similar political values — has been more prevalent since late 2022.
Major bilateral trade developments during this time were largely shaped by the conflict in Ukraine, the separation of economic interdependence between the United States and China, and the effects of Brexit.
“At the same time, there has been a decline in the diversity of trading partners, which means that global trade has become more concentrated among major trade relationships,” the report notes.
The analysis shows how trade dependency between the US and China continues to contract. It shows how the importance of the United States has diminished somewhat as a market for Chinese exports over the past year and a half. U.S. dependence on China as a supplier has declined much more during this time.
The International Monetary Fund warned at the beginning of June of growing threats to global trade, saying protectionism could make the world less resilient, more unequal and more vulnerable to conflict.
Outcomes of different trade between major economies
According to the report, over the past four quarters, growth in merchandise trade for major global economies has been uneven.
Significant rises in imports and exports have been observed in Brazil, India, the United States and the European Union.
However, between January and March 2023, trade patterns for major economies were generally more negative on a quarterly basis. Remarkable growth in exports from China and India is a notable exception.
Trade trends in the region
With the exception of the economies of the Russian Federation and Central Asia, each region has seen an increase in world trade each year.
However, growth in East Asia was well below the global average.
The value of trade in most regions declined during the first quarter of 2023 on a quarterly basis, with the exception of the Pacific, North America and Africa, which saw a slight increase.
Over the same time period, intraregional trade followed similar trends. However, it is not surprising that intra-African trade grew by 3 percent, outpacing other intra-African trade.
How do different sectors work?
Energy prices have increased trade values over the past four quarters, impacting global trade trends, falling 11 percent quarterly between January and March 2023.
Road vehicles, clothing, chemicals and agri-food products were among other industries that saw a rise in trade.
In contrast, trade in transport, office equipment and telecommunications declined, as downward trends continued throughout the first quarter of 2023.
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