Global Trade Declines Last Year for the First Time Since Financial Crisis... "This Year Hit by COVID-19"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Last year, global merchandise trade declined for the first time since the 2009 financial crisis due to the impact of the US-China trade war. Although trade increased at the end of last year as the United States and China reached a Phase One agreement, it was insufficient to prevent the overall decline.

According to Bloomberg and other sources on the 25th (local time), the Netherlands Bureau for Economic Policy Analysis (CPB) announced that the global merchandise trade volume decreased by 0.4% compared to the previous year. This marks the first decline since the 2009 global financial crisis and is significantly lower than the over 3% growth seen in 2018. Bloomberg explained that this reflects "US President Donald Trump's protectionist trade policies, the US-China trade war, and the slump in Germany's manufacturing sector."

However, looking at monthly data, the global trade volume in December last year increased by 0.5% compared to the same period the previous year. This marks a recovery in global trade after seven months of significant declines since May last year. Foreign media reported that the trade volumes of emerging Asian countries and Eastern Europe increased by 6% and 2.5%, respectively, positively influencing December trade. It is also interpreted that the announcement of the official trade agreement between the US and China in December contributed to this.

Initially, the market expected that the US and China would fully implement the agreement this year, leading to an increase in global trade. However, the unexpected 'wildcard' of the novel coronavirus disease (COVID-19) has emerged, and economic damage due to reduced global demand and supply chain disruptions is expected to be significant. The Donald Trump administration has emphasized that there will be no changes to the trade agreement due to COVID-19, but considering the increasing number of deaths worldwide, damage appears inevitable. Adam Slater, an economist at Oxford Economics, said, "Trade is expected to decline again in the first quarter of this year due to COVID-19."

Global trade is already decreasing due to COVID-19. According to ING, about 50% of shipping exchanges between Asia and Northern Europe have been canceled since the spread of COVID-19. ING explained that trade volume is expected to decline in the first half of this year. ING analyst Tim Sparke said, "Last year was a difficult year for global trade due to the trade war impact," adding, "The spread of COVID-19 could prolong this."