International disputes between the world’s biggest economies are having a negative effect on international shipping and trade, according to international shipping association BIMCO.
In its latest Shipping Market Outlook, BIMCO says global GDP is about to shrink, with trade volumes set to decline in 2019, mainly due to the US-China trade war.
This is already being felt by the shipping industry. According to IHS Markit, overall business confidence for the year ahead is at its lowest for two years.
Furthermore, new global export orders fell for the first time in two years, as the Global PMI indicator dropped to 49.7 in September from 50.3 in August, ending two years of solid trade growth.
The World Trade Organisation (WTO), according to BIMCO, forecasts a decline in global trade volumes in 2019, with only South and Central America seeing an increase on 2018’s volume.
Advanced economies will suffer the most as they see their growth peak at 2.4% in 2018 and slow down to 1.5% by 2023.
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This will, in turn, disproportionately affect global volumes due to these economies’ high trade-to-GDP multiplier.
Negotiations over new trade deals with Australia, New Zealand, as well as the agreement struck with Japan in August 2018, has helped to ease worries that the EU could adversely suffer from US tariffs and Brexit.
However, continued uncertainty around the Brexit withdrawal agreement could still hamper European growth.
Emerging economies, however, will fare better and enjoy the growth of 4.7% in 2018 and 4.8% by 2023, with a possible peak of 4.9% in 2020.
The decline in global trade has been felt particularly hard in Asia, as export orders have fallen for six out of the last seven months.
This has affected the three major Asian economies, in particular, South Korea, which is set for its lowest annual GDP figures since 2012.
Peter Sand, Chief Shipping Analyst at BIMCO, had this to say: “Global trade grew quite slowly between 2012-2016. Is this a return to the “new normal slow growth” environment?
“It could very well be. After two years of brighter prospects for economic growth and trade, prosperity has been brought down by adverse trade politics.”