The world is a changed place. With the arrival of populism in Europe, North and South America and parts of Asia, the world economic order that was overseen by the US has been undermined by none other than the overseeing country. We should not stick our heads in the sand and continue with the belief that it will all be alright on the day. The global economy is experiencing changes that are having a fundamental impact on the future.
Let us consider how these forces of change will impact trade and how they will likely lead the world into a recession within the coming 18 months. The combination of Donald Trump and the dramatic migration to Europe created a wave of populism that was waiting to burst out as large parts of national electorates were disenchanted with the world economic order. Populist governments in Italy, Venezuela and the US threaten major changes. The UK, Germany, Sweden, Hungary, Poland and Slovakia have all had major upsets due to the rise of populism which by its nature is inward looking and xenophobic.
Globalisation is under threat from President Trump. In his speech at the UN General Assembly he clearly stated that his administration was against globalisation and was more concerned about its own issues. That is the underlying attitude that has brought trade disputes and tit-for-tat tariffs on to the world stage. Added to this, the sanctions threatened by the US for anyone trading with countries not in their favour will create further reductions in trade.
The belief that the US-China trade war will bring benefits to Europe is based on a false premise. Where is the demand being generated among European consumers to absorb such a large increase in trade, particularly as Brexit, with or without an agreement, will reduce GDP growth and consequently trade as demand becomes even weaker?
We should not underestimate the negative impact that the growing ‘Me First’ attitude will have on trade volumes and ports will be among the first to feel the changes, be they in China, Europe or the US. As the trade winds blow, the whiff of recession is on the horizon.