Political Developments Worsen Global Trade Outlook

After a very low pace of growth in 2015, global trade growth has slowed further over the first half of 2016, according to Atradius Credit Insurance N.V.

Trade growth in Emerging Asia, the world’s second largest trade bloc, is extremely low, as China rebalances from investment-driven growth toward a more inward-looking consumption-led growth.

Lower commodity prices have also dampened investment in natural resource-rich economies around the world which has contributed to a sharp contraction of trade in Eastern Europe and slowdown in Latin America.

Even the US has seen its trade growth grind to a halt, due to lower investment in the oil and gas sector, but also because of lower external demand and a strong USD which have reduced exports.

In 2016, the tempo of growth in world trade is expected to be about one-third of global GDP growth. Such a low rate of trade growth has not occurred since the global economic crisis of 2009.

Anti-globalization sentiment is rising, as is evidenced by political developments like Brexit and the election of Donald Trump as US president. Trade liberalization efforts like TPP and TTIP are stalling, thereby threatening the outlook for trade.

Subdued global GDP growth already motivates a subdued global insolvency outlook, but muted trade growth could put  upward pressure on insolvencies in countries that are dependent on trade.

Brexit-related uncertainty is expected to increase corporate bankruptcies in economies with a heavy focus on exporting to the UK.

Protectionist measures in the US could have the same effect on economies with high trade ties to the US, especially those in Latin America.

“Matters for trade are made far worse by political developments,” says John Lorié, Global Chief Economist at Atradius.

“These are flatly trade-unfriendly, as signaled not only by the Brexit vote in the UK, but also by the stalling of the regional trade liberalization efforts. Anti-trade rhetoric by US president-elect Donald Trump make matters even worse. These developments are likely to weigh on future trade data.” 

Read more on

Suggested Articles

Some of you might have already been aware of the news that Questex—with the aim to focus on event business—will shut down permanently all media brands in Asia…

Some advice for transitioning into an advisory role

Global risks are intensifying but the collective will to tackle them appears to be lacking. Check out this report for areas of concern