Active Stocks
Tue Apr 16 2024 15:59:30
  1. Tata Steel share price
  2. 160.05 -0.53%
  1. Infosys share price
  2. 1,414.75 -3.65%
  1. NTPC share price
  2. 359.40 -0.54%
  1. State Bank Of India share price
  2. 751.90 -0.65%
  1. HDFC Bank share price
  2. 1,509.40 0.97%
Business News/ Politics / News/  Global trade hit by Ukraine war, China lockdowns

Global trade hit by Ukraine war, China lockdowns


European consumers curbed spending as energy prices surged; Chinese factories slowed as authorities battled Covid-19 outbreaks

Growth in exports to the European Union and Southeast Asia slowed, as did exports to Russia as Western sanctions disrupted its trade with the rest of the world. Growth in exports to the US picked upPremium
Growth in exports to the European Union and Southeast Asia slowed, as did exports to Russia as Western sanctions disrupted its trade with the rest of the world. Growth in exports to the US picked up

SINGAPORE : Accelerating inflation, war in Ukraine and lockdowns in China dented international commerce in March, a sign the global economy is entering a rough patch as policy makers battle to sustain growth.

Data from China, Japan, South Korea and Taiwan all point to a pullback in global trade as European consumers wilted under the pressure of surging energy prices, and Chinese factories slowed to a crawl as major cities such as Shanghai and Shenzhen locked down. The U.S. appetite for imports has held up, but is likely to be challenged as inflation and rising interest rates bite into consumer spending.

Finance ministers and central-bank chiefs will gather in Washington, D.C., next week to discuss the challenges dogging a world economy that economists expect to register sharply lower growth this year than in 2021.

In its latest projections, published Tuesday, the World Trade Organization said it expects the global economy to expand just 2.8% in 2022, weaker than the 3% average between 2010 and 2019. It expects global trade in goods to grow just 3%, after adjusting for price changes, compared with 9.8% in 2021. The Geneva-based WTO said it marked down its expectations because Russia’s invasion of Ukraine has disrupted trade in essential goods such as grain and fertilizer, and lockdowns in China “are again disrupting seaborne trade at a time when supply chain pressures appeared to be easing."

Chinese export growth slowed to an annual 15% in March, from 16% in January and February combined, China’s customs bureau reported Wednesday. Official data combine the first two months of the year to try to smooth out big swings in activity around Lunar New Year, a major holiday in China and many parts of Asia. Economists say that can still leave the picture skewed, and tend to make their own statistical adjustments to account for the break, which this year fell in early February.

Julian Evans-Pritchard, senior China economist at Capital Economics, said that after his seasonal adjustments, he estimates Chinese exports in March were down 6% from February. Taking into account the effect of higher export prices due to surging commodity prices, Mr. Evans-Pritchard said in a note to clients that his calculations point to the largest contraction in Chinese export volumes since the pandemic hit in early 2020.

Growth in exports to the European Union and Southeast Asia slowed, as did exports to Russia as Western sanctions disrupted its trade with the rest of the world. Growth in exports to the U.S. picked up.

Angus Lin, a trading manager at Wenzhou Dian Pet Products Co., said logistics logjams as a result of the Covid outbreak in Shanghai have forced delays in shipments to foreign customers, while orders from Europe have declined following the Russian invasion of Ukraine.

The pet-toys supplier, based in Wenzhou, in China’s Zhejiang province, mainly exports to North America, South America and Europe through the huge ports at Shanghai, around 285 miles away, and Ningbo, around 180 miles away. Road closures and other restrictions meant to stem infections have made it tricky to get deliveries to the port on time.

“Almost all the orders have been affected these days," he said.

In another sign of the gathering headwinds to global trade, Chinese imports fell as the country’s worst Covid-19 outbreak in two years led to lockdowns in regions as far-flung as Jilin in the northeast and the technology hub of Shenzhen in the south, keeping millions at home. As factories’ production slowed, so did demand for components. Authorities have taken small steps to ease the lockdown in Shanghai, China’s most populous city, but restrictions continue to disrupt the flow of goods through the city.

Imports in March were down 0.1% from a year earlier, customs data showed, China’s first annual fall in imports since August 2020. Imports from the EU and the U.S. both declined.

“Imports falling outright is very bad for global trade," said Craig Botham, chief China economist at Pantheon Macroeconomics.

Imports from Russia were up 26% in March, slowing from the January-February pace of 36%. Analysts said that after taking account of higher energy prices, imports from Russia likely declined in March, suggesting China didn’t step up purchases of Russian oil shunned by the West.

Adjusting for the holidays and inflation, Mr. Evans-Pritchard said he estimates overall import volumes in March were down fell 10% from February.

The data from China cap a string of downbeat trade signals from Asia’s export powerhouses pointing to disruption to global trade, which served as the engine for the region’s recovery from the depths of the pandemic in 2020.

“This is a region that has thrived on trade," said Aaditya Mattoo, chief economist for East Asia and the Pacific at the World Bank.

Russia’s invasion of Ukraine and Western sanctions in response have driven steep increases in commodity and energy prices. That has pushed up companies’ costs, interrupted supply chains and damped demand in Europe, where consumers have been hit by surges in natural-gas and gasoline prices.

For Asian exporters, China’s battle against Covid-19’s Omicron variant means fewer orders from Chinese factories for chips and other components used in electronics and vehicles, as well as softer Chinese demand for their own finished products. Surveys of purchasing managers at manufacturers in Taiwan, South Korea and Japan this month all recorded the sharpest drops in export orders in almost two years.

Official trade data for Taiwan and South Korea are similarly downbeat. Adjusting for the Lunar New Year and other seasonal effects, economists at Goldman Sachs calculated that Taiwan’s exports in March were down 9% from February, while South Korea’s were up just 0.5%.

South Korea’s Hyundai Motor Co., said this month that overseas sales in March were down 14% from a year earlier as the company battled supply-chain problems, including the shutdown of a factory in Russia.

“We are definitely going through a rough patch," said Brian Tan, regional economist for Asia at Barclays in Singapore. “It is going to be fairly choppy, especially in the next few months as China is clearing up the outbreak."

—Bingyan Wang and Grace Zhu in Beijing and Kwanwoo Jun in Singapore contributed to this article.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App