In the last Xport blog I wrote about a strengthening US economy paired with an overall decline in global trade. I spent some time thinking about this seemingly paradoxical position. It appears to me that this result can, in part, be traced to ongoing trade battle between the US and China.
As previously discussed, back in early 2000s global trade expanded by double digits. In 2019, the World Trade Organization expects trade growth to decrease to 2.6%. By comparing the two timeframes, it seems that one possible reason is that global supply chains dramatically shifted over the past 20 years into China. Today, as those supply chains shift and diversify (driven in part by US protectionism), we can see that trade may actually decline as a result.
As reported by the Wall Street Journal’s Josh Zumbrun, the anticipated resolution of the US-China trade conflict will bring “better treatment of US companies in China” and increased “purchase of US agricultural goods,” companies are still “skittish about rushing back in to revive the once-booming investment activity between the two countries.” This is also fueled a clamp down in “Chinese spending” and “US security concerns.”
When all is said and done, all that is left to do is to wait and see if business “nervousness” will be soothed or increased as a trade resolution is delivered in the coming months.