The EconomistMarch 28th 2020 631C
ontainer-ship navigators, box-tick-
ing customs officials, logistics wizards,
truck drivers and warehouse nightwatch-
men: all are familiar with dealing with
glitches involving international trade,
from strikes to trade wars. But with fore-
casters predicting a slump in global gdp
this year, even their most creative thinking
cannot keep $25trn of goods and services
flowing around the world.
Trade is the conduit through which eco-
nomic pain passes from one country to an-
other. Even simple products rely on elabo-
rate supply chains: a humble cup of coffee
requires 29 firms to collaborate across 18
countries, according to one estimate.
Shocks convulse in either direction. A port
closure or customs delay can cripple pro-
duction elsewhere. If consumers stop buy-
ing cars and phones, manufacturers and
workers in distant lands feel the pinch.
When world output, at purchasing-
power parity, fell by 0.1% in 2009, trade vol-
umes collapsed by a whopping 13%. Quar-
terly volumes fell by even more (see chart).
Weaker demand in America and the Euro-
pean Union rippled along trade routes to
Canada, China, emerging Asia, Japan and
Mexico. One study finds that 27% of the de-cline in American demand and 18% of that
in the European Union was borne by for-
eign producers.
The shock coming this year threatens to
be far more brutal. When one of the world’s
economic giants sneezes, the rest of the
world catches cold. Now everyone is
coughing. Factory closures are being exac-
erbated by a rise in trade barriers. And glo-bal demand is plummeting as households’
incomes dry up and cash-strapped firms
put their investment plans on ice.
At first the virus infected manufactur-
ing in China, which typically supplies
nearly 10% of the world’s intermediate-
goods trade. The dollar value of Chinese ex-
ports in January and February was 17% be-
low what it was a year earlier (though
American tariffs may also have contributed
to the weakness). As delivery times
stretched out for longer and longer, com-
panies had to pause production for lack of
components.
Now factories across Europe, North
America and Asia must cope not only with
uncertain supplies of parts from China but
also with sick workers and a dizzying array
of local and national shutdowns. Audrey
Ross of Orchard International, a company
based in Canada that trades products in-
cluding mascara and bath sponges, says
planning has become a nightmare. One
customer in Germany is closed; another in
France is open. Warehouses in America
have shorter opening hours. Diversifying
away from China had at first seemed like a
sensible strategy. Now nowhere is safe.
To make matters worse, barriers to trade
are going up. More than 50 governments
have restricted exports of medical sup-
plies, 33 of which acted after the beginning
of March. Tourism has been crushed—it ac-
counts for 8% of global services trade.
Flight cancellations have seen the cost of
air freight, much of which goes in the belly
of passenger jets, soar. Vaughn Moore of
ait Worldwide Logistics, a freight-for-
warding company, reports that rates haveWorld tradeTrucks, queues and blues
WASHINGTON, DC
If you thought the trade war was bad for cross-border commerce...On edgeSources: CPB;
IHS Markit*Based on a survey of purchasing executives,
activity compared with the previous month20100-10-20
2007 2015Global trade volumes
Three-month moving
average, % change on
a year earlier^70605040302007 2015Purchasing
managers’ index
New export orders*Euro area↓ContractingUnited
StatesFinance & economics
64 The mortgage market sickens
64 Doling out greenbacks
65 Is the ECB’s latest salvo enough?
65 America steps into the oil market
66 Buttonwood: Special situations
67 Free exchange: Paying for the
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