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Monthly trade monitor for the world's top 10 economies - June 2020
19 June 2020Tomasz Brodzicki, Ph.D.
Main observations
April 2020 brought about a massive collapse in the value of
exports (year-on-year) with exports falling by 19.1% in Japan and
by 25.1% in South Korea, and even to a larger extent for the US,
marking a drop by 29.0% and Canada by 38.1%
The EU economy was struck hard; EU exports went down by
approximately 3% in January and February 2020 year-on-year, the
slump increased to -7.7% in March and external exports of the EU
collapsed in April by 36.7% year-on-year
The only major economy to present a year-on-year increase in
the value of export in April 2020 so far is China with an increase
of 3.5%
Out of the top 10 largest economies, only Brazil has reported
the data for May 2020 - they point to a contraction in exports by
12.9% year-on-year, a second month after -7.6% in April 2020;
Brazil is the last of the top 10 to be adversely affected by
COVID-19
The value of imports was also significantly affected in April
2020 and it went down by 3.5% year-on-year in Japan, 15.8% in South
Korea, 14.8% in Brazil, 20.9% in the US and a staggering 33.6% in
the case of Canada; external imports of the EU went down by 12.1%
in March and even to a larger extent by 29.7% year-on-year in April
2020
It is important to note, that despite the increase in exports
in April 2020, Chinese imports went down year-on-year by 13.8%
The collapse in imports was fueled by declining GDP and thus
contraction in demand for imports (due to positive marginal
propensities to import, import changes reflect GDP changes)
The outbreak of COVID-19 is one of the largest black-swan
events in a century with a tremendous impact on affected economies
globally
The reaction in trade is consistent with the escalating global
COVID-19 pandemic and steps were taken by individual countries (or
group of countries) in controlling or mitigating - South-Eastern
Asia was affected first (and is first showing signs of recovery),
then Europe and the Americas
The impact on global trade will depend on the duration,
severity and the spatial distribution of the pandemic together with
actions taken independently by states with several scenarios of
recovery still possible (V or U shape)
Global value chains have already been significantly affected -
a new global trade pattern is highly likely to emerge if the
pandemic lasts longer; a potential second wave in autumn this year
could have drastic consequences for the global economy postponing
the expected recovery to next year
Prospects for the forthcoming months are
grim
The prospects for the forthcoming months are not very
optimistic
The values of PMI manufacturing new export orders adjusted for
May 2020 are significantly below the benchmark value of 50.0
pointing to a significant contraction
The index in May 2020 takes the lowest value for India - the
second month in a row it is below 10.0, it is below 30.0 for both
the US and EU (excluding the UK); it has increased above 40.0 for
China and is close to 40.0 for Canada
On an optimistic note, the PMI readouts for May 2020 are higher
than in April for most apart from aforementioned India and
Japan
The contraction in exports is likely to last throughout Q2 2020
in most of the economies
The recent GDP growth forecasts from IHS Markit Comparative
Industry report (published on 15 May 2020) point to a recession in
most of the states throughout 2020 apart from China mainland
(recovery in Q2) and India (recovery in Q3 2020). The worst
affected countries (regions) in Q2 2020 are forecasted to be the UK
and the EU
Stronger recovery in real GDP growth rates is expected only in
2021. The same is forecasted by the GTA Forecasting team for global
trade (with a decline closer to the optimistic scenario of the
recent WTO forecast)
Taking into account the multiplier effect between GDP growth
and trade growth in times of crisis exceeding the value of 3.0 we
can expect the contraction of trade in most of the states to last
through 2020 and to be more than two-digit values year-on-year
The disruption to global value chains is likely to last longer
than priorly expected
Main economies of the world and methodological
issues
Top ten economies by GDP in 2019 include: the US, EU (excluding
the UK), China, Japan, UK, India, Brazil, South Korea, Canada, and
Russia
They are responsible for 79% of the world GDP in 2019 and 73%
of global exports in 2019 with most trade carried out within the
group itself
We present year-on-year changes in the value of exports and
imports for available monthly trade data from GTA for the period
from March 2018 to May 2020 in percent
Data edge differs from country to country depending on a given
reporter
China reported an aggregated value of trade for
January-February 2020 - the data in GTA were equally split between
the two months.
Posted 19 June 2020 by Tomasz Brodzicki, Principal Economist, GTAS Forecasting, Maritime & Trade, IHS Markit
