Having overcome the worst phase of COVID-induced headwinds and the supply chain crisis, the global economy witnessed a quick turnaround, with international trade hitting a record high of $28.5 trillion in 2021. However, geopolitical uncertainties and their resulting impact seem to be a cause for concern for international trade. Here are the top seven trends that will have bearings on the current financial year:
The War Specter
The Russia-Ukraine war, which began on February 24th, rages on and continues to send oil and gas prices through the roof. Russia and Ukraine are key suppliers of essential goods including food, energy, and fertilizers, supplies of which are now threatened by the war. The Russian invasion, if it prolongs, will only increase the volatility of global stock markets and slow down the recovery of the world economy which seems to be back on the growth track after bearing the brunt of tough COVID times.
Soaring Coal Demand
The global coal demand seems to be steadily rising, with US exports increasing 49% to $7.3 billion in 2021 and China importing three times more. With India — the world’s second-largest coal importer — staring at a power crisis and looking for more imports, the prices of coal are likely to skyrocket at the global level. Curbs on Russian coal have only strained supplies from Brazil and South Africa, the two major coal producers.
Supply Chain Strains
With China going into lockdown, the global supply chains are already under stress. Shanghai, home to the world’s largest container port, has remained shut since March 28th. One in five container ships is now stuck at ports worldwide. The freight cost for a single container from China to the US has increased from $5,900 last year to $15,764. Transportation costs make up 7.7% of the global GDP, which means delays at ports will only push inflation up.
Amid negative developments, the booming international trade brings solace, as it is doing far better by surpassing pre-pandemic levels. US goods exports in 2021 topped 2019’s level by 5% while imports rose by 11%. The World Trade Organization expects global trade to increase 4.7% in 2022, after rising 10.8% in 2021. However, according to the UNCTAD, the international trade in goods and services, which reached $28 trillion in 2021, will remain subdued but normal in 2022.
There is a growing concern for a greener planet, and governments all over the world are enacting policies to encourage the use of electric vehicles. As a result, the global electric vehicle market is expected to grow at CAGR of 18.2% from 2020-2030. Electric car sales are expected to top $800 billion by 2027, more than double the current value of the market.
The increasing digitalization has helped small companies to reach a wider audience and create new opportunities. In 2020, global internet traffic was estimated to be more than 3 zettabytes, or 3 trillion gigabytes, and it will be 50% larger in 2022. The fast-expanding world of online consumers is driving the new digital-age economy, forcing companies to reinvent their business models and encouraging governments across the globe to initiate digital trade agreements.
Many nations are entering into bilateral free trade agreements for easy access to markets. The major highlight of this year has been the Regional Comprehensive Economic Partnership (RCEP), which came into force on January 1st and eliminates more than 90% of tariffs on trade among 15 Asia-Pacific nations. Meanwhile, the 11-country Trans-Pacific Partnership (TPP) is attracting new applicants, including the UK, South Korea, Taiwan, and China.
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