Consistent with rising protectionist sentiment spurred by the war on Ukraine, global trade in goods has remained suppressed in the first quarter of 2023. This can be observed in the WTO’s barometer index staying below the baseline value of 100 and global trade as a percentage of GDP decreasing, especially for major economies such as China and India (signalling an end to their revolutionary export booms). Hence, consequences of this declining demand is displayed in falling industrial production and weakening commodity prices.
Nonetheless, although these indicators all point towards globalisation stalling, there is yet to be conclusive evidence of a reversing trend. Although there were concerns surrounding the trade war between the US and China, their retaliatory tariffs reallocated trade to other parts of the world rather than reducing trade as a whole. Furthermore, with supply chain constraints being largely resolved, forward looking indicators point to a turnaround in the second quarter of 2022. Given that international trade is still expected to grow by 1.9%, it is hoped the global economy will tide past the current phase of tight Monetary Policy conditions, declining Fiscal support and protectionist sentiment. Thus, only in doing so will the world be able to avoid the consequences of deglobalisation, such as higher prices and lower living standards, increasing global inequality and even a potential Cold War between the US and China.