Game of Trade: Unbowed, Unbent, Unbroken

11/23/2017 - Report
ic_blogtagEconomic OutlookTradeChinaJapanMexicoUnited StatesFranceGermanyItalyUnited KingdomEnergyInformation & Communication TechnologiesMachinery & EquipmentASEAN (Association of Southeast Asian Nations)BrexitEurozoneExportsFinancial ConditionImportsInvestmentPolitical RiskProtectionismTrade

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​The volume of global trade is estimated to increase by +4.3% in 2017 and +3.9% in 2018. In value terms, it is forecast to expand by +7.5% in 2017 and +6.3% in 2018. The latter takes place after two disappointing years (2014-16), during which global trade has lost close to USD3tn. The main culprits were demand shocks and a collapse of commodity prices.

In 2017, due to a significant rise in prices, we expect the trend to reverse. By 2018, global trade should recover the massive losses. Furthermore, trade recovery is set to add half a point to world GDP growth this year and next and help it edge above +3%. 

Strong demand growth will come from the US, the Eurozone, and emerging Asia. On the export side, Europe and Emerging Asia are set to benefit the most from the trade momentum.

We identify three issues that hamper the acceleration: First, the number of protectionist measures is high and keeps on rising. A case in point is the US and its approach toward China. Second, financial balkanization remains a cause for concern. Global cross-border bank lending contracted by -0.2% y/y in Q2 2017 due to asymmetric regulation. Monetary policy normalization could impact the availability of hard currency and raise the costs of financing. Last, increasing geopolitical tensions pose an additional risk.


We see three positive boosters going forward. First, investment flows should grow by +3% in 2018. These should be supported by stronger corporate balance sheets and a record USD7tn of cash on balance. Second, smart industrial policies and large infrastructure projects help. Moreover, regional free trade agreements fill the void left by defunct global deals. Last, services and digitalization may drive a new golden age for trade, although it may still be hard to trace their impact on national statistics. A growing number of innovative solutions focus on safer and stronger supply chains, including the growing field of TradeTech.​

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