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Apr 23, 2019 7:00:00 AM

Strong US Growth in 2019 Means Declining Trade Overall… Why?

On April 2nd, as announced by the World Trade Organization (WTO) and reported by the JOC’s Mark Szakonyi, that the 2019 forecast for global trade “would decrease from 3% to 2.6%.” This is driven by the several factors, to include a “slowing global economy” and “rising protectionism.” As Szakonly reports, the International Monetary Fund (IMF) also “predicts for 2019 that we will have the slowest global economic expansion since 2016 at 3.3%.” In addition, unlike the “early 2000’s when there was double digit trade growth” on the heels of rapidly expanding globalization, it appears that growth today is driven by “pure demand needs” of economies.

Comparatively, the US economy is continuing to strengthen in a “bullish” manner in 2019. Back in 2017 stock market gains were as much as 25% for the Dow Jones and 28% for the NASDAQ. Then in 2018, there was a net loss of ~6% overall. Heading into 2019, volatility was the expectation. However, as recently reported by the Wall Street Journal’s Gunjan Banerji, “volatility has continued to evaporate [across}… currencies, bonds, and oil.” As such, we seeing that investors are deciding whether to “chase performance” or to bide their time waiting for a potential decline “if sentiment changes all of a sudden.” This highlights an interesting balance between a weakening global economy, a strengthening US economy, and slow trade due to protectionism.

To me it appears that any growth in trade will be fueled by continued American consumption of goods.Due to protectionist tendencies happening all over (especially as played out by the continued delay of Brexit ) and, as reported by the Wall Street Journal’s Sam Goldfarb, a “softening Eurozone economy as a result of falling Treasury yields,”I expect that (as previously referenced above), US demand for goods and services will drive trade growth overall.

Topics: trade war, imports and exports, US and China Tariffs, global trade, impacts to freight forwarding, global supply chains

Author: Mario Bruendel

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