Global Trade Reorientation Offers Opportunity, Not Disaster
News reports all over continue issuing dire warnings about the future of global trade.
BCG recently calculated that international trade will increase 2.3% annually until 2031, compared to global GDP growth of 2.5%. For a decade before the pandemic, Brendan Murray of Bloomberg News reports, trade and GDP growth largely mirrored each other.
This is not the end of the world. While global trade is growing at a slower pace, it is still growing – and on a much larger base. International trade is expected to near $32 trillion in 2022, according to U.N. economic reports.
Yes, geopolitics – the Russia/Ukraine war, China vs. Taiwan, tariffs and protectionism, the resulting inflation from a world of perpetual disruption – is making trade tougher and more expensive. But nearshoring, friend-shoring and staying closer to home are opportunities to build stronger trade alliances with friendlier countries and grow the economies of regions that still have largely underserved populations. Perhaps, like Western commerce with China, shifting trade alliances could lift even more people out of poverty.
As I have pointed out previously, South America, Africa and the ASEAN countries are poised to capitalize. The BCG report echoes this, noting that slowing trade between the EU/U.S. and China/Russia will lead to a “corresponding rise in commerce between northern and southern regions as countries find new trading partners in Africa, South America, and Southeast Asia.”
Take Brazil, for example. Beyond the opportunities Tompkins Ventures has found there for shoes, apparel and furniture, the largest country in South America exports billions of dollars of soybeans, iron ore, crude petroleum, raw sugar, frozen bovine meat, poultry meat and wood pulp, according to the Observatory of Economic Complexity.
Similar opportunities can be found elsewhere. While the U.S. is making an effort to produce more high-end semiconductors domestically, three ASEAN nations (Malaysia, Thailand and the Philippines) export large numbers of the vital chips.
So while international trade is not growing as quickly as before, huge opportunities exist to reorient global supply chains to add greater resilience and reduce costs. There’s no need for our civilization to collapse.