Trade thrives on trust and predictability. But with supply chains bucking and borders closing, both are in short supply
navigators, box-ticking customs officials, logistics wizards, truck drivers and warehouse nightwatchmen: all are familiar with dealing with glitches involving international trade, from strikes to trade wars. But with forecasters predicting a slump in globalthis year, even their most creative thinking cannot keep $25trn of goods and services flowing around the world.
When world output, at purchasing-power parity, fell by 0.1% in 2009, trade volumes collapsed by a whopping 13%. Quarterly volumes fell by even more . Weaker demand in America and the European Union rippled along trade routes to Canada, China, emerging Asia, Japan and Mexico. One study finds that 27% of the decline in American demand and 18% of that in the European Union was borne by foreign producers.
At first the virus infected manufacturing in China, which typically supplies nearly 10% of the world’s intermediate-goods trade. The dollar value of Chinese exports in January and February was 17% below what it was a year earlier . As delivery times stretched out for longer and longer, companies had to pause production for lack of components.
To make matters worse, barriers to trade are going up. More than 50 governments have restricted exports of medical supplies, 33 of which acted after the beginning of March. Tourism has been crushed—it accounts for 8% of global services trade. Flight cancellations have seen the cost of air freight, much of which goes in the belly of passenger jets, soar.
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