No end in sight to flat trade growth

When I look at various drivers that in the past have had an input into the way consumers and industry behave there is now conflicting evidence. The conclusion that one can draw from this is that expounding economic theory is a waste of time for the coming year — a terrible thing for an economist to admit.

Perhaps it makes more sense to regard political events as the current driving force for trade. The background to this is easy to explain. The US has not had a recession since the latter part of 2009, China has not had a recession for an even longer period and The Economist tells us that Australia has not had one for nearly two decades. The eurozone managed to squeeze in a recession in 2013 and a slight dip in growth in 2015 — and that does not include the euro crisis nor the paltry growth levels, when there is positive GDP, on an annual basis.

So where do we look for the new drivers of trade and their impact on consumption and investment? We can start with Angela Merkel, the queen of austerity, who was driven by her domestic political concerns but applied them to the rest of the eurozone countries as well. She took measures applicable to a healthy economy and forced their application on unhealthy economies such as Greece, Spain, Portugal and Italy, to mention but a few. Economic pain followed and consumption and investment tanked.

President Trump came along and put “America First” and dragged the US into a tariff war which has short term positive impacts on trade as importers try to beat the upcoming 25% tariff (if implemented), but will strike a heavy blow to trade next year. Russia and China’s military escapades are also drivers of declining trade as sanctions are put in place.

All of these political events have led to right-wing fundamentalist populism across Europe, Central and South America and increasingly in Asia. The biggest loser is Mrs Merkel whose party has suffered at the polls in Bavaria and Hesse. She is on the way out.

The takeaway here is that 2019 will not be a strong year for trade and 2020 will be even weaker. Ports that have already felt the blow of flat trade growth should expect little improvement any time soon.