6 July 2020

The World Trade Organization has predicted that global trade in goods will drop by between 13 and 32 per cent in 2020 as a result of the pandemic.

The last time trade volumes dropped substantially, during the financial crisis of 2008, they recovered – but not at pre-crisis rates of growth.

Before the current pandemic, trade tensions had already led to a slight fall in global trade in goods in 2019.

In addition, there were several other pre-coronavirus trends that looked likely to have a negative impact on the global trade in goods, including concerns over the Chinese government, new technology, and environmental issues.

With the exit of the relatively free-trading UK, the EU is in danger of succumbing to more protectionist voices. In the US, Donald Trump was elected on a platform that included promises to address what he saw as unfair trade practices.

The current economic slowdown has also potentially exposed the fragility of global supply chains and exacerbated those concerns over trading with China.

While it can be expected that global trade will bounce back in 2021, the nature of the recovery is not yet clear, but it may not recover to the same level or trajectory as seen prior to lockdown.

This briefing paper examines the factors that will determine whether the recovery in trade volumes will follow the WTO’s optimistic or pessimistic scenario.