Global trade was down 18.5% in May. And that’s the good news.
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Markets flipped out overnight after White House trade adviser Peter Navarro told Fox News that the U.S.-China trade deal was “over.” Navarro then said he’d been quoted out of context, and President Donald Trump affirmed the deal is “fully intact.”
On the heels of that, the World Trade Organization reported Tuesday that global trade in the second quarter dropped 18.5% compared to last year.
For context, that big a drop in trade is really bad.
WTO Director-General Roberto Azevêdo spoke about the drop in a YouTube video.
“It will be the steepest on record,” Azevêdo said. “But there is an important silver lining here: The falling trade could have been much worse.”
Earlier estimates had trade falling more than 30% this year. Now it looks like the hit will be closer to 13%.
Trade is about people wanting stuff in one country, then parts and labor coming together from other countries to get that thing to them. But that’s tough to do in a pandemic.
“If there’s five different countries involved in making a blue widget with white polka dots, and if one of those countries is not operating at full capacity, then the rest of the supply chain either has to slow down, or stop, or find an alternative,” said Christine McDaniel, a senior research fellow at the Mercatus Center.
Earlier in the pandemic, a lot of trade just stopped. But now, said Geoffrey Gertz at the Brookings Institution, “we’re entering this new phase where there seems to be these rolling blackouts of countries turning on and off their economies going in and out of lockdowns.”
Even as economies in Europe and the United States reopen, for now, more cases and lockdowns in Brazil, India and sub-Saharan Africa create more disruptions. Dawda Jawara, with Africa-focused investment firm Altica Partners, gave the example of a key port in Kenya.
“If ships aren’t coming into Mombasa, then raw materials and finished materials aren’t being sold and distributed in Kenya, Rwanda, Burundi, Tanzania, all of the kind of inland countries,” Jawara said.
Keeping trade flowing requires countries to keep COVID-19 under control. But that’s a big if, so the WTO and other trade groups create a best-case scenario, a worst-case scenario and cross their fingers.
COVID-19 Economy FAQs
Will the federal government extend the extra COVID-19 unemployment benefits?
It’s still unclear. Congress and President Donald Trump are deciding whether to extend the extra $600 a week in unemployment benefits workers are getting because of the pandemic. Labor Secretary Eugene Scalia believes the program should not be extended, and White House economic adviser Larry Kudlow said the additional money is disincentivizing some workers from returning to their jobs. Democrats want to keep providing the money until January.
As states lift restrictions, are people going back to stores and restaurants?
States have relaxed their restrictions, and many of us have relaxed, too. Some people have started to make exceptions for visiting restaurants, if only for outdoor dining. Some are only going to places they trust are being extra cautious. But no one we’ve talked to has really gone back to normal. People just aren’t quite there yet.
Will surges in COVID-19 cases mean a return to lockdowns?
In many areas where businesses are reopening, cases of COVID-19 are trending upwards, causing some to ask if the lockdowns were lifted too soon, and if residents and businesses might have to go through it all again. So, how likely is another lockdown, of some sort? The answer depends on who you ask. Many local officials are now bullish about keeping businesses open to salvage their economies. Health experts, though, are concerned.
You can find answers to more questions here.
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