Global Trade Collapsing To Depression Levels

The macro fears are once again trickling down to the micro level, and last week chip giant Intel tumbled after it guided to a "more cautious view of the year," and Italian drinks maker Davide Campari-Milano SpA this month noted the “uncertain geopolitical and macroeconomic environment.”

“The world economy has been in a significant slowdown for a period,’’ said James Bevan, chief investment officer at CCLA Investment Management. “People just have to wake up and look at the trade data.’’

But the best way to visualize just how serious the threat to the global flow of trade, and the world economy in general, below is a chart on the year-over-year changes in global trade as measured by the IMF's Direction of Trade Statistics, courtesy of BMO's Ian Lyngen. It shows the absolutely collapse in global exports as broken down into three categories:

  1. Exports to the world (weakest since 2009),
  2. Exports to advances economies (also lowest since 2009), and
  3. Exports to the European Union (challenging 2009 lows).

In short, even before the latest round of trade escalation, global trade had tumbled to levels last seen during the financial crisis depression. One can only wonder what happens to global trade after the latest escalation in the US-China trade war...

(Click on image to enlarge)

Commenting on the chart above, Lyngen writs that "as estimates of the fallout from the renewed Trade War begin to reflect the growing apprehension in a variety of markets, we're struck by the extent of the drop in exports."

On Wednesday, markets were clearly not struck by the drop in exports, or any other negative news for that matter, with the Dow ripping, reversing its entire morning drop, and trading over 100 points in the green at last check.

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