Both exports and imports are forecast to have slumped 10% or more in March, with data due Tuesday expected to show a continuation of the declines seen in the first two months of the year. The outlook is grim too, with the World Trade Organization now saying that 2020 could see the worst collapse in international trade since the Great Depression.
Her estimates are echoed by others. UBS economist Ning Zhang expects exports to decline by 20% between April and June, citing the coming recessions in the U.S., Europe, Japan, and some emerging economies. Macquarie Group Ltd.’s Larry Hu thinks it’s certain that export growth could fall further in the second quarter and a 13% decline in the whole of 2020 is his base case.
The WTO’s optimistic scenario last week saw a 13% drop in the volume of international goods trade in 2020. The last such drop was in 2009, when trade volumes fell by 12% during the financial crisis. Their pessimistic scenario sees the volume of global goods trade dropping by as much as 32% this year.
If that pessimistic case happens, Chinese exports could fall much more than 13%, according to Macquarie’s Hu.
While much of the weakness in February’s data was due to China’s domestic measures to curb the initial outbreak, the irony is that companies are now getting back to work and nearing full capacity just as their overseas markets are closing.
A majority of Chinese exporters have resumed over 70% of production capacity by March 30, according to the Ministry of Commerce, but factories are already seeing order cancellations.
Policymakers across the globe have rushed to introduce stimulus to help their economies over the shutdowns and social distancing necessary to stop the spread of the virus, but there’s little sign of a peak in infections yet. In China, the State Council has ordered more measures to “stabilize trade” including building more cross-border e-commerce zones and moving the main trade fair online.
However, with the world facing its worst recession since the 1930s this year and half the member nations of the International Monetary Fund already seeking aid, there’s little prospect of the trade situation improving soon.