This report contributes to the monitoring of trade developments in wake of multiple shocks and challenges which have been surfacing since the COVID-19 pandemic. While there is an expectation that trade will grow faster in 2024 and 2025, concerns remain about potential negative impacts on trade and output of high inflation, high interest rates, maritime transport disruptions and increasing trade and geopolitical tensions.
The analysis shows that relatively strong performance of services trade in 2023 was driven by travel-related services which were impacted more heavily by the pandemic travel restrictions in 2020-22 and which continued to recover still in 2023. The product composition of both goods and services trade has been shifting back towards the pre-pandemic structure. However, relatively large differences remain even now, particularly for services.
After the phase out of China’s COVID-19-related restrictions, the country’s trade and output grew faster than those for the OECD area and the world in 2023 and at the beginning of 2024 and this supported world trade growth. 2023 also saw some stark changes in the partner and product structure of China’s trade which may be an indication of a more structural re-orientation of China’s trade. The decline in China’s import growth since the beginning of this year may be an indication of the country’s economic slowdown which could have significant negative implications for global trade and the world economy. Meanwhile, the significant decline in Russia’s goods trade balance in 2023 reflected a high base effect of soaring energy prices following Russia’s invasion of Ukraine in 2022 as well as the effects of far-reaching trade and other economic sanctions on Russia.
In 2023, commodity prices have continued their decline, albeit this was from historically high levels reached following the COVID-19 pandemic and Russia’s invasion of Ukraine. At the beginning of 2024, commodity prices remained higher than pre-pandemic levels despite subdued global GDP growth in 2023.
The recent transportation disruptions in the Suez and Panama Canals highlight the importance of understanding the relationships between trade and transportation including routes, chokepoints and shipping costs. Maritime transport accounts for almost half of internationally traded goods and it is a particularly important mode of transport for trade of energy-related and agricultural products. Shipments of these products account for most of the maritime traffic in the Suez and Panama Canals.
The rerouting of ships from the Suez Canal is resulting in longer transit times, shipping delays and increased costs, not only on the maritime routes crossing through the Suez Canal, such as those connecting Asia and Europe, but also on routes to and from the US East Coast due to the interconnectedness of maritime routes — which are already experiencing an additional upward pressure from the reduced capacity in the Panama Canal cause by drought. Adjustments have been taking place and, so far, the impacts have been limited, illustrating a degree of resilience of global trade to maritime transport disruptions. But the analysis also shows a range of effects which, if magnified or spread to other transport routes or chokepoints, may have more significant implications for global trade, prices and economic growth in the future.
Significant changes in the global EV landscape have been driven, in part, by China's rapid growth as key supplier in the electric vehicle supply chain – from critical raw materials to intermediate inputs such as EV batteries to final electric vehicles. Over the last two years, market concentration has increased driven by China’s expanding market presence. Similarly, the EV battery export market, long dominated by Japan, Korea, and China, has seen further concentration in recent years, particularly since 2021, with China's influence continuing to grow. Accordingly, China's dominance in the EV and EV battery markets is viewed as a significant challenge for other car-producing and consuming economies. This dominance raises concerns about trade dependency and resilience in an industry that is seen as increasingly crucial to the green energy transition.