Global Trade Slows as Economies Adjust to Life After Stimulus

The global economy avoided a meltdown 2020-2022 due to the Covid-19 pandemic because governments around the world, led by the U.S., printed trillions of dollars for their own citizens, oiling consumer demand and goosing merchandise trade around the world.

That steroid is now wearing off, as consumers have spent most of the money they were given, and because their spending fueled inflation, making it harder to buy as much stuff, and that’s denting Chinese exports, according to an analysis by Trade Data Monitor, the world’s premier source of trade statistics.

In April, exports rose only 3.9% over the previous year, to $273.6 billion. That’s the lowest rate in two years, and far below a 14.7% improvement in March. Imports were flat at $222.5 billion, and would have declined precipitously without broad inflation in the prices of key commodities.

Much of the economic analysis has focused on the impact of Russia’s invasion of Ukraine, and the pandemic locking down ports in China, but the bigger picture is that the world is now having to adjust to consumers no longer having huge stacks of free cash in their pockets to spend on retail goods made in China.

The upshot: Chinese shipments of high-tech products in April declined 4.9% year-on-year to $72.3 billion from $76 billion. Exports of LCD panels declined 0.5% to $2.3 billion. Exports of mobile phones fell 7.3% to $10.3 billion. Exports of household appliances declined 5.3% to $7.9 billion. Exports of furniture fell 2.9% to $6 billion.

There were some exceptions to this bleak picture, mainly due to people being outside and on the move again. Shipments of cars and trucks rose 8.9% to $2.8 billion. Shipments of footwear rose 28.2% to $3.8 billion. Exports of toys, which includes a lot of outdoor athletic gear, increased 18.1% to $3.6 billion.

And battery-related industries are still expanding, requiring a strong supply chain. Rare earth exports doubled to $109.4 million from $54 million. (Contrary to popular assumption, rare earths remain a small, niche market.)

To be sure, Chinese exports are still increasing, partly because of inflation and partly because the world is still recovering from the Covid-19 pandemic. Exports to the EU increased 8.1% to $43.1 billion. Shipments to the U.S. rose 9.6% to $46 billion. Exports to ASEAN countries rose 7.7% to $44.2 billion.

Officially, Chinese imports were basically flat, but that was only because of price inflation in essential commodities. It was only those rising prices which kept Chinese imports from freefalling. Natural gas imports, for example, rose 32% by value, to $4.3 billion from $3.2 billion, but fell 19.6% by quantity, to 8.1 million tons from 10.1 million tons. Iron ore imports fell 12.6% to $86 million tons. Copper imports declined 1.9% to 1.9 million tons. It’s clear that Chinese industry is slowing down.

It’s the high-tech supply chains that appear most affected by the current slowdown. Exports to Vietnam, a key component of China’s supply chain, fell 0.2% to $12.8 billion. Imports from Vietnam declined 4.7% to $6.5 billion.

Imports from the EU fell 12.5% to $23.4 billion. Imports from the U.S. declined 1.4% to $13.8 billion. Imports from ASEAN countries rose 3.7% to $32.8 billion.

China is one of the only economies still buying huge quantities of Russian exports. It hiked shipments, mostly gas and oil, 53.2% to $8.9 billion in April. However, Russian consumers, beset by a painful war economy, are having an even more difficult time than those in the U.S. and Europe. Chinese exports to Russia fell 25.8% to $3.8 billion.

As Vietnam’s Export Economy Matures, Stronger Ties With China

The burgeoning economy of Vietnam is maturing its way into a new phase. The Asian nation of 97.3 million has taken its place among the linchpins of high-tech supply chains, taking in raw materials and churning out mobile phones, tablets, and other computer gear for over a billion middle-class consumers all over the world.

In addition, Vietnam is becoming a key part of the alliance of Asian trading powers setting up a counterpoint to the economic poles of the U.S. and European Union, according to an analysis by Trade Data Monitor, the world’s premier source of trade statistics, which has been building up its Vietnam database.

Overall Vietnamese exports in the first quarter of 2022 increased 13.6% year-on-year to $89.1 billion. Much of that growth is being driven by Chinese and U.S. manufacturing companies. Of those exports, $65.4 billion, or 73%, came from foreign direct investment.

Overall, Vietnam’s gross domestic product is expected to rise 5.5% in 2022, up from 2.6% in 2021, according to the World Bank. Part of the increase in exports is due to a rebound from the Covid-19 pandemic, but Vietnam is also booming its production of consumer goods. The exporting manufacturing sector in 2022 will benefit “from steady demand from the United States, the European Union, and China,” the World Bank wrote in a recent report.

Vietnam’s main partner as manufacturers draw up new global supply chains is China. Imports from China increased 12.6% to $27.4 billion, dwarfing figures from other countries. Meanwhile, exports to China rose 7% to $13.4 billion.

As it imports large quantities of parts and raw materials from China, Vietnam is still beefing up exports to Western markets. Exports to the European Union increased 18.3% to $11.6 billion. Shipments to the U.S., its top export market, rose 16.7% to $26 billion.

The bad news for exporters in the West is that Vietnam, like China, is shrinking its purchases from the U.S. and EU. Imports from the EU declined 3.2% to $4 billion, and shipments from the U.S. fell 7.8% to $3.4 billion. Those are tiny numbers compared to shipments from China. Overall imports rose 15.8% in the first quarter of 2022 to $87.6 billion.

Vietnam’s integral role in high-tech supply chains is visible in its imports. Imports of “computers, electrical products, spare-parts and components thereof” increased 31.1% to $21.7 billion. Imports of “machine, equipment, tools and instruments”, however, fell 2.9% to $10.5 billion. Vietnam’s manufacturing prowess means it is more self-sufficient than most countries. That’s one of the reasons imports of textiles, for example, shrank 6.4% to $1.6 billion.

However, it needs large quantities of raw materials. Imports of crude oil rose 2.6% by quantity to 1.9 million tons. By value, they increased 49.8% to $1.2 billion. Imports of chemicals rose 34.2% to $2.3 billion.

Vietnam’s total trade, remarkably, is twice that of GDP. Its trade with regional partners is expected to expand further thanks to the new Regional Comprehensive Economic Partnership. The RCEP, which will cut tariffs and ease trade among countries that already trade with each other, includes Vietnam, China, Japan, South Korea, Australia and New Zealand. Vietnam has been the prime beneficiary of China’s changing trade relationships with the U.S. and Europe, rising protectionism in the West, supply chain adjustments, and the boom in economies across Asia. The combination of low labor costs, stable exchange rates and prodigious foreign investment from multinational companies have turned Vietnam into a shining star.

To be sure, Vietnam’s agribusiness, the anchor of its export economy before industrial development, is still prosperous, and evolving. Its exports of fishery products rose 45.4% to $2.5 billion, while exports of fruits and vegetables declined 12% to $849 million.

Although Vietnam has raised concerns by pursuing its trade relationship with Russia following its invasion of Ukraine, it actually has strong ties with both countries. Exports to Russia in the first quarter declined 29.1% to $543.8 million, while imports increased 36.3% to $703.7 million. Meanwhile, exports to Ukraine declined 42.5% to $45.3 million, while imports from Ukraine increased 122.6% to $104.9 million.

China Cuts Imports as War, Covid Threaten World Trade

China reduced imports year-on-year in March as the global economy stuttered following Russia’s invasion of Ukraine and a resurgence of the Covid-19 pandemic.

Overall, China shrank imports 0.1% to $228.7 billion. Accounting for the nasty price inflation now starting to bite, that represents a meaningful contraction. To boot, analysts had predicted an increase around 8%.

It’s part of a larger trend. On Tuesday, the World Trade Organization reduced its global trade growth forecast to 3% from 4.7%, largely because of the war in Europe.

One exception: China, which has declined to join the EU and U.S. in their harsh criticism of Russia invading Ukraine, increased imports from Russia 22.1% to $7.8 billion while exports fell 7.6% to $3.8 billion. By comparison, imports from the European Union declined 11.6% to $24.3 billion, while exports to the EU increased 21.7% to $44.4 billion. Imports from the U.S. fell 12.1% to $15.2 billion, while exports to the U.S. rose 22.7% to $47.3 billion. Exports to ASEAN countries increased 10.4% to $41.6 billion, while imports rose 2.3% to $34 billion. The ASEAN countries are now China’s largest trading partner, ahead of the U.S. and EU, as the world continues to economically splinter.

Chinese officials suggested an optimistic big picture. Chinese exports rose 14.7% year-on-year to $276.1 billion. For the entire first quarter, Chinese exports grew 15.8% to $820.9 billion. “Generally speaking, China’s foreign trade got off to a smooth start in the first quarter of this year, laying a good foundation for achieving the target for the whole year,” said spokesman Li Kuiwen. “At the same time, we should also see that there are some unexpected, sudden factors in the current international and domestic environments, the external environment of foreign trade is becoming more severe, development faces many risks and challenges.”

All the signs point to a contraction of Chinese industrial activity. China reduced imports of natural gas 7.8% year-on-year to 8 million tons, refined petroleum products 11.7% to 1.8 million tons, and crude petroleum oil 14% to 42.7 million tons. China broadly reduced its agriculture imports in March, as Covid helped delay freight arrivals. It cut imports of soybeans 18.2% year-on-year to 6.3 million tons, grain 5.6% to 12 million tons, and vegetable oil 60.6% to 307,000 tons.

Another major challenge: After a strong rebound in global trade driven by Western consumers spending stimulus money, the economy faces a possible recession, especially with inflation starting to bite. For example, China’s shipments of mobile phones declined by volume 8.6% to 66.9 million sets but increased 14.1% by value to $12.4 billion. That means people are buying less but prices are going up. One burgeoning sector of the Chinese industrial economy that continues to perform well is its production of cars and trucks. Automotive shipments increased 54.5% to $3.3 billion.

The development of the green economy has underscored the importance of rare earths. Exports of rare earths increased 100.1% to $116.6 million. For all their importance, rare earths remain a relatively small, niche industry.

With China buying less, that’s likely to increase calls for protectionism. In March, the overall trade surplus with the U.S. increased 50% to $32.1 billion, from $59.8 billion combined in January and February.

One hopeful sign: Exports of footwear increased 26.8% to $3.2 billion. Overall last month, China exported 597.8 million pairs of shoes.

Belarus' Crucial Role for Russia: Dairy Farm

With Belarus facing possible sanctions for helping Russia invade Ukraine, it’s worth taking a look at the country’s trade profile.

Belarus has a gross domestic product of $62.5 billion, around one-tenth the size of its neighbor Poland.

It mainly trades regionally, except for buying consumer products from China, and its small economy means sanctions won't roil commodity markets in the way that action against fuel-rich Russia will, but the country of 9.4 million does play one crucial role in global trade: 8% of all of Belarus’ exports is cheese, milk and other dairy producs to Russia.

Belarus exported $2.2 billion in dairy products to Russia, up 8.9%, in 2021. That accounted for roughly 75% of Russia’s dairy imports. Argentina and New Zealand were second and third.

Overall, in 2021, Belarus exported $28.3 billion, up 4%, and imported $31.2 billion, down 0.2%, for a slight trade deficit. Most of Belarus’ trade was with geographical neighbors, especially Russia.

Russia bought roughly half of all of Belarus’s exports, $14.4 billion, up 13.6%, followed by Ukraine ($2.5 billion, down 20.1%), Poland ($1.8 billion, up 51.1%), Lithuania ($1.3 billion, up 23.1%), and Germany ($1.1 billion, up 23.9%).

Belarus’ main exports to Ukraine were mineral fuels, wood, plastics, cars and trucks, machinery, and fertilizers.

Belarus also shipped $1.2 billion worth of cars and trucks, up 23.9%, to Russia in 2021, as well as $821.2 million of plastics, up 15.5%, and $525 million of meat, down 1.2%.

Russia, the world’s 12th biggest exporter by value, was also the source of around half of Belarus’ imports in 2021.

Belarus’ top sources of imports in 2021 were Russia ($16.1 billion, up 0.4%), China ($3.4 billion, down 3.2%), Germany ($1.6 billion, down 5.7%), Ukraine ($1.5 billion, up 5.1%), and Poland ($1.1 billion, down 10.9%).

Belarus top imports from Russia in 2021 were mineral fuels ($3.8 billion, down 38%), iron and steel ($2 billion, up 67.7%), plastics ($1 billion, up 32.4%), and electronics ($1 billion, up 17.7%).

Its top imports from Ukraine were iron and steel, animal feed, and soybeans.

Belarus imported $1.2 billion, down 11.6%, of cars and trucks, mostly from Russia and China. Car powers Germany and U.S. were third and fourth.

Gold, Oil, Diamonds and Fertilizers: 10 Things You Need to Know About Russian Exports

The Russian economy is a unique engine, without globally significant manufacturing, but powerful in its capacity to generate fuels, and a handful of valuable natural resources, such as wood, gold, and fertilizers.

Here are 10 essential things to know about Russia’s exports:

1. Russia’s top trading partner is China. In 2021, it shipped $68.1 billion worth of goods to China, up 38.5% from 2020. China now makes up 14% of Russia’s exports, up from 6.7% in 2013.

2. Russia’s top exports to China in 2021 were: 1. Petroleum. 2. Iron ore and copper. 3. Wood. 4. “Suppressed commodities”. 5. Machinery.

3. Russian petroleum exports increased 49% y-on-y to $211.5 billion in 2021.

4. The biggest buyers of Russian petroleum in 2021: China, Netherlands, Germany, South Korea, the U.S., Poland, Turkey, Belarus, Italy, and Japan.

5. Russia's top high-tech exports to all its partners in 2021: 1. Turbojets. 2. COVID-19 Vaccines. 3. Fuel cartridges for nuclear reactors. 4. Radar equipment. Its top customer for high-tech good was China.

6. Russia’s third top export category is precious stones, including gold and diamonds. Its top three buyers in 2021: the UK, the US, and Belgium.

7. In 2021, Russia shipped $15.4 billion of gold to the UK, making up 3% of its total national exports.

8. In 2021, Russia exported $4.5 billion of diamonds, up 39.9% from 2020. Its top customer: Belgium, which bought $1.8 billion worth.

9. Russia is the world’s fourth biggest wood exporter, after Canada, China, and Germany. Russia exported $11.8 billion of wood in 2021, up 42.6% from 2020. Its top customer was China, which bought $3.6 billion worth, followed by Finland, Japan, Uzbekistan, and the U.S.

10. Russia is the world’s number one exporter of fertilizers. In 2021, it shipped out $12.5 billion worth of fertilizers, up 78.4% from 2020. Its biggest buyer was Brazil, which bought $3.5 billion worth, followed by the U.S., China, Estonia, and Finland.