In 2018 global trade was a stable share of the global economy. Global trade has been stable for some years. The changing nature of the global economy suggests we may have hit peak globalization. Global trade growth did slow in late 2018.
It is clear from the Trump Twitter Feed that the US president has not given up on taxing trade. We have had tweets in praise of steel tariffs, for example. However, the US president also seems be willing to come to some sort of trade deal with China. The realization that taxing trade is a tax on equities may have helped.
Reviving trade may take more than reducing tensions with China. The direct result of the US–China dispute has been a change in patterns of trade. A US firm can shift production to Canada. A Chinese firm can shift production to Thailand. Both avoid the trade taxes. However, companies may have cut capital spending while waiting for trade tensions to be solved. That includes the uncertainty over NAFTA and Brexit. This matters to trade. A large share of exports goes into capital spending. There is more to solve than just the US–China trade tensions if trade is to improve.
Author: Paul Donovan, Global Chief Economist GWM, UBS AG