The trade war of former US president Donald Trump and the supply chain snarl-ups caused by Covid turned deglobalisation into a mainstream topic. And two developments in the past two years suggest that the process might indeed have begun.
The first of these is the fact that global trade in goods in 2023 declined by a little over 1 per cent even though global GDP expanded by a trend-consistent 3.2 per cent, according to the IMF. This is unusual. However, we see this pullback in part as a normalisation after the extraordinary rebound in 2021-22 of the world economy following the pandemic. As a result, by the third quarter of 2022, global trade was almost 9 per cent above the pre-Covid level, and ahead of trend.
This was driven by the rapid easing of supply-chain problems, and amplified by the need to restock depleted inventories, which prompted a rebound in production and in cross-border trade. But some moderation was always likely once these effects had run their course. Moreover, it is now widely accepted that consumer demand is shifting away from goods and towards services — all part of post‑Covid normalisation — and this dampens global trade. That said, the latest data suggests renewed expansion in trade since the start of 2024, albeit modest.