Monthly trade monitor for the world's top 10 economies - June 2020

Main observations

• April 2020 brought about a massive collapse in the value of exports (year-on-year) with exports falling by 19.1% in Japan and by 25.1% in South Korea, and even to a larger extent for the US, marking a drop by 29.0% and Canada by 38.1%
• The EU economy was struck hard; EU exports went down by approximately 3% in January and February 2020 year-on-year, the slump increased to -7.7% in March and external exports of the EU collapsed in April by 36.7% year-on-year
• The only major economy to present a year-on-year increase in the value of export in April 2020 so far is China with an increase of 3.5%
• Out of the top 10 largest economies, only Brazil has reported the data for May 2020 - they point to a contraction in exports by 12.9% year-on-year, a second month after -7.6% in April 2020; Brazil is the last of the top 10 to be adversely affected by COVID-19

• The value of imports was also significantly affected in April 2020 and it went down by 3.5% year-on-year in Japan, 15.8% in South Korea, 14.8% in Brazil, 20.9% in the US and a staggering 33.6% in the case of Canada; external imports of the EU went down by 12.1% in March and even to a larger extent by 29.7% year-on-year in April 2020
• It is important to note, that despite the increase in exports in April 2020, Chinese imports went down year-on-year by 13.8%
• The collapse in imports was fueled by declining GDP and thus contraction in demand for imports (due to positive marginal propensities to import, import changes reflect GDP changes)
• The outbreak of COVID-19 is one of the largest black-swan events in a century with a tremendous impact on affected economies globally
• The reaction in trade is consistent with the escalating global COVID-19 pandemic and steps were taken by individual countries (or group of countries) in controlling or mitigating - South-Eastern Asia was affected first (and is first showing signs of recovery), then Europe and the Americas
• The impact on global trade will depend on the duration, severity and the spatial distribution of the pandemic together with actions taken independently by states with several scenarios of recovery still possible (V or U shape)
• Global value chains have already been significantly affected - a new global trade pattern is highly likely to emerge if the pandemic lasts longer; a potential second wave in autumn this year could have drastic consequences for the global economy postponing the expected recovery to next year

Prospects for the forthcoming months are grim

• The prospects for the forthcoming months are not very optimistic
• The values of PMI manufacturing new export orders adjusted for May 2020 are significantly below the benchmark value of 50.0 pointing to a significant contraction
• The index in May 2020 takes the lowest value for India - the second month in a row it is below 10.0, it is below 30.0 for both the US and EU (excluding the UK); it has increased above 40.0 for China and is close to 40.0 for Canada
• On an optimistic note, the PMI readouts for May 2020 are higher than in April for most apart from aforementioned India and Japan
• The contraction in exports is likely to last throughout Q2 2020 in most of the economies
• The recent GDP growth forecasts from IHS Markit Comparative Industry report (published on 15 May 2020) point to a recession in most of the states throughout 2020 apart from China mainland (recovery in Q2) and India (recovery in Q3 2020). The worst affected countries (regions) in Q2 2020 are forecasted to be the UK and the EU
• Stronger recovery in real GDP growth rates is expected only in 2021. The same is forecasted by the GTA Forecasting team for global trade (with a decline closer to the optimistic scenario of the recent WTO forecast)
• Taking into account the multiplier effect between GDP growth and trade growth in times of crisis exceeding the value of 3.0 we can expect the contraction of trade in most of the states to last through 2020 and to be more than two-digit values year-on-year
• The disruption to global value chains is likely to last longer than priorly expected

Main economies of the world and methodological issues

• Top ten economies by GDP in 2019 include: the US, EU (excluding the UK), China, Japan, UK, India, Brazil, South Korea, Canada, and Russia
• They are responsible for 79% of the world GDP in 2019 and 73% of global exports in 2019 with most trade carried out within the group itself
• We present year-on-year changes in the value of exports and imports for available monthly trade data from GTA for the period from March 2018 to May 2020 in percent
• Data edge differs from country to country depending on a given reporter
• China reported an aggregated value of trade for January-February 2020 - the data in GTA were equally split between the two months.