The trade war between the US and China overshadowed 2019. The COVID-19 crisis was the most disruptive theme in global trade in 2020.
So what’s in store for 2021?
Luckily, it seems like this year’s headlines will be more positive: The global trade recovery from the COVID-19 crisis is slowly underway. But that recovery won’t look the same in all countries, and it largely depends on the success of the vaccination campaigns.
It All Depends on the Vaccines
The World Trade Organization (WTO) estimates world trade in merchandise, or goods, will grow 8% in volume in 2021, after falling 5.3% in 2020. “Ramping up production of vaccines will allow businesses and schools to reopen more quickly and help economies get back on their feet,” stated WTO Director-General Ngozi Okonjo-Iweala.
As encouraging as that sounds, the vaccines are also a caveat: trade in 2021 rises and falls in tandem with the rate of global vaccinations. If vaccine production and distribution accelerate, global GDP could rise by one percentage point this year. If it doesn’t, or if new variants of the virus emerge that current vaccines can’t handle, a global trade retreat could decrease global GDP by one percentage point, according to WTO’s estimates.
The second issue is that trade will likely recover, but the recovery will be uneven. Countries like the US will emerge fast and strong from the pandemic. Vaccine distribution has picked up in Europe as well, with several EU countries lifting lockdowns and travel restrictions.
Unfortunately, the situation looks very different in other parts of the world. India is fighting a massive virus outbreak and has halted all vaccine exports to Africa since March. Most African countries were relying on the vaccine supply from India, meaning vaccinations in Africa have come to a sudden halt, and supplies from India are unlikely to return until October.
Asia is also hit by a virus wave, partly coming from India. Southeast Asian countries like Thailand have so far fared relatively well but now record rising virus cases almost every day. At the onset of the pandemic, Southeast Asia had the virus under control. Now that the western world is in the final months of the pandemic, the virus is spreading in Asia.
On top of that, the US has been fast and strong in delivering economic stimulus. According to the WTO, in 2021, demand for traded goods will be driven by North America (11.4%) thanks to large fiscal injections in the US. That should also stimulate other economies through the trade channel. Europe and South America will both see import growth of 8%, while other regions will register lower increases.
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