Global Trade Collapsing to Depression Levels
The comments below are an edited and abridged synopsis of an article by Tyler Durden
With the trade war between the US and China escalating once more, investors are worried about declining global trade volumes that threaten to upend the global economy’s rebound and could even throw its decade-long expansion into doubt if the conflict spirals out of control.
Even before the latest trade war, global growth and trade were already suffering, confirmed by dismal China economic data, which showed industrial output, retail sales and investment all sliding in April by more than economists forecast.
A similar deterioration occurred in the US, where retail sales unexpectedly declined in April while factory production fell for the third time in four months. Meanwhile, in Europe, even though Germany’s economy grew by 0.4% in the first quarter, the outlook remains fragile amid a manufacturing slump that will be challenged by the trade war. Investor confidence in Europe’s largest economy weakened this month for the first time since October.
About 1% of global economic activity is at stake in goods and services traded between the US and China. Almost 4% of Chinese output is exported to the US and any hit to its manufacturers would reverberate through regional supply chains, with Taiwan and South Korea among those at risk.
US shipments to China are more limited, though 5.1% of its agricultural production heads there, as does 3.3% of its manufactured goods.