Until recently, the answer to the question has global business peaked? would be a resounding no. International trade had dramatically risen. In terms of both revenue and the number of countries participating. Yet, the the long-run peak may now be at hand. Especially given the short-run and long-run impact of COVID-19.
In June 2019, we reported on the state of global business, based on OECD data. It concluded that the world economy was already stumbling:
Global momentum has weakened markedly. In addition, growth will remain subpar as trade tensions persist. Therefore, trade and investment is slowing sharply, especially in Europe and Asia. Furthermore, business and consumer confidence will falter further. With manufacturing production contracting. We project global growth to slow to only 3.2% this year. Well below the growth rates seen over the past three decades. Or even in 2017-18.
As of Mid-2020: Has Global Business Peaked?
Given the faltering global economy before COVID-19, post-COVID-19 future global economic projections are more dire.
“After decades of growth for world trade, global tourism, and international cooperation, globalization hit a couple of roadblocks in recent years. The reemergence of nationalism and protectionism have undone some of the progress. After global trade growth slowed significantly in 2019, due largely to trade tensions between the United States and China, COVID-19 is expected to cause an unprecedented fall in trade.”
“According to the World Trade Organization, world merchandise trade may plummet between 13 and 32 percent this year. That depends on how quickly the virus is contained. And trade can return to pre-crisis levels. ‘These numbers are ugly. But a rapid, vigorous rebound is possible,’ WTO Director-General Roberto Azevêdo said in a press release. While emphasizing the role of free trade on the road to recovery. ‘Keeping markets open and predictable, as well as fostering a favorable business environment, will be critical to spur the investment we will need. And if countries work together, we will see a much faster recovery.'”
As the following chart based on World Bank data show, global trade — as a percentage of global GDP – has been relatively stagnant for years. Following several decades of uninterrupted growth. Following the trade decline caused by the global financial crisis in 2009, world trade never returned to its previous growth trajectory. In fact, many expect a similar long-term effect of the current crisis. Having reminded many companies of the vulnerabilities of global supply chains, both the pandemic and the trade war between the U.S. and China could lead towards a more domestic approach to production and sourcing. That might result in a sustained reduction of global trade.”