World trade: A very bleak recovery in 2020 – ING

Analysts at ING point out that with two months of data for 2019 still to be reported, world trade in goods is on track to have contracted 0.5% for the full year.

• "Industrial production in advanced economies, a major driver of world trade in goods, has been a washout too. The eurozone, US, and Japan all experienced declines over the last 12 months. The outlook for 2020 is not particularly bright either, with manufacturing Purchasing Managers Indexes (PMIs) in the US and China having bottomed out while those in the euro area point to continued contraction. In the euro area, inconclusive trade negotiations with the US and the ongoing threat of auto tariffs, as well as uncertainty surrounding Brexit, continue to weigh on activity. This matters a lot for world trade, where the EU accounts for just under a third of flows.
• Our model shows that the momentum in global industrial production, subdued as it is, implies growth of around 1% in 2020, and underlying growth in international goods trade of around 0.6%. When we add to this underlying growth the direct effects from the trade war, we derive our base case forecast for world trade and the growth rate if downside or upside risks materialise.
• Our base case is that we expect the US to assume a tough stance and step up its trade war rhetoric, but for tariffs to remain largely at their current levels in 2020.
• With no major new tariff increases, the trade war will only directly drag on goods trade growth to the extent that tariff increases in 2019 feed into 2020. This should leave overall trade growth at 0.5%."