War hits global trade

The latest report released by Crédito y Caución warns of a reversal of the trend seen in 2021 of accelerating global trade growth. The credit insurer forecasts that the increase in merchandise trade will be limited to 4% in 2022 and 2023, which implies an acceleration of the return to normality, with a one-to-one ratio between global GDP growth and trade.

World merchandise trade rebounded strongly in 2021 despite the negative impact of recurrent waves of COVID-19. Its strong growth of 9.8% allowed it to surpass the pre-pandemic level of trade in October 2021. Detailed analysis reveals strong growth in steel, chemicals or integrated circuits and weaker growth in clothing or machinery. Automotive showed strong growth, but below 2019 levels due to disruptions in its value chain. Regionally, growth in the US was in line with the global average while in the eurozone it was slightly below. In China (13.6%) and the rest of emerging Asia (18.6%), growth was much more dynamic. In 2022, the war in Ukraine and China's zero-tolerance policy will cause world trade to slow down.

Russia and Ukraine have a relatively small share in world trade (2%), but a large impact on commodity prices. Both countries account for a quarter of world wheat exports and have a specific weight in exports of fertilisers (13%), cereals (8%) and fats and oils (6%). Russia is also a major supplier of platinum (13% of world exports), nickel (12%) and, above all, oil and gas (10%). The war has led to a sharp rise in the prices of all these commodities, which depresses real incomes and raises production costs in both advanced and emerging economies, impacting global trade. 

The war has also led to the diversion of freight transport routes to already overburdened ones. Parts of the Black Sea and the Sea of Azov are not passable and shipping lines have closed routes to avoid Russian airspace and ports. Container cargoes in Russian ports have also declined by 50% year-on-year and have come to a complete halt in Odessa since the beginning of the war. In this context, delivery times, shortages of intermediate goods and trade costs have increased in many countries.

These major disruptions to global trade are compounded by disruptions in the value chain, which remains under pressure from China's zero-tolerance strategy. While air and sea ports remain operational, closures in Shanghai and other major cities have led to labour shortages that affect trucking companies, reduce ground handling staff and ultimately are reflected in slow ports. Air traffic has also been significantly affected.