International trade has experienced a significant blow as the ongoing coronavirus pandemic continues to wreak havoc across the globe. The United States, like many other nations, has seen its goods exports plummet by approximately 6.7% in March, marking the most substantial decline since the financial crisis of 2008. Key sectors like American automotive and industrial supplies witnessed sharp declines, with automotive shipments falling by nearly 18%, and industrial supply shipments dropping by 7.5%.
This decline in exports is just the tip of the iceberg, as experts warn of more significant disruptions to come in the world of international trade. The unprecedented economic fragility seen at home and abroad is expected to persist in the coming months. The pandemic has forced nonessential businesses to close their doors in many countries, leading to global factory shutdowns and a dramatic decrease in consumer demand. While there is surging demand for personal protective equipment and medical supplies, most other sectors are grappling with these challenges.
“The coronavirus pandemic is set to have a massive impact on world trade,” noted Adam Slater, lead economist at Oxford Economics. “Steep falls in industrial output will hit trade in goods hard, while the unusually service-driven nature of the emergent recession also means services trade will plummet.”
The trade deficit has surged by 7.2% in the face of these challenges, with imports of international products into the U.S. contracting at a slower pace compared to the decline in exports. Imports fell by just 2.4%, driven by a 9% drop in automotive shipments. The current state of labor markets and economic instability has led consumers to postpone major purchases like cars and other high-priced items.
Analysts predict that 2020 is poised to become the worst year for international trade, potentially surpassing the impact of the global financial crisis. The scale of industries affected by the coronavirus outbreak and the slow recovery expected in the months ahead are contributing to this grim outlook. Global trade could shrink by as much as 15% this year, according to Slater, surpassing the 10% decline during the financial crisis.
Adding to the challenges are export bans and other disruptions in the medical sector, as many world leaders, including President Donald Trump, have implemented measures to secure essential medical supplies domestically.
The slowdown in trade is also expected to severely impede the commitments outlined in the partial U.S.-China trade deal signed in January. Despite the recent improvement in the situation in mainland China, fulfilling China’s commitments to import U.S. agricultural and other products now appears extremely challenging. President Trump, while expressing confidence in China’s adherence to the agreement, has also raised the possibility of terminating the deal if it falters, further adding to the uncertainty in global trade.
