In Quentin Tarantino’s “Kill Bill: Volume 2”, an action drama, the protagonist, played by Uma Thurman, punches her way out of a coffin. Global trade in goods has performed a similar death-defying stunt during the COVID-19 pandemic. In April things looked dismal. Some predicted global trade would slump by more than 30% this year, compared with 2019. But after a gut-wrenching spring, trade volumes recorded their biggest monthly rise on record in June, the last month of available data (see chart). Oxford Economics, a consultancy, predicts that in 2020 as a whole volumes may drop by 10%.
This resilience has defied recent experience, as well as expectations. In 2009, when global GDP fell by 0.1% in the final year of the financial crisis, trade plunged by a whopping 13%. This year the IMF forecasts that global GDP could fall by 4.9%, ie, 50 times more than in 2009. So why will the hit to trade probably be smaller?
After the financial crisis trade volumes fell much further than GDP mostly because people stopped buying heavily traded durable goods, such as cars. But in the current crisis, untraded domestic services have been harder hit than they were back then. Going to the cinema or a restaurant halted during lockdown. Buying an imported fridge did not. That has made the drop in trade relative to GDP smaller.
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