WTCA Meridian November 2018 Feature: The Ups and Downs of Global Trade

A brief glance back at the moments that defined global trade in 2018, and how these might affect what’s to come in 2019

This past year was volatile for global trade and commerce, with new trade deals, testy international relationships, and the disruption of traditional institutions paving the way for evolving trade partnerships and new investment opportunities.

Perhaps the biggest contributor to trade volatility in 2018 was the strict tariffs United States President Trump implemented on roughly half of the goods the United States imports from China, which triggered a spate of retaliatory measures. Overall, opinion on these tariffs has been resoundingly negative, with the IMF fearing they’ll “trigger financial market volatility and slow investment and trade.”

This volatility between the US and China came as China continued to try to make inroads in Europe. First China tried to convince the European Union to align with China in joint opposition against the United States trading policies, a proposal the EU ultimately rejected. Then at a meeting of the 16+1 Summit in July, China and 16 Eastern and Central European countries sought to foster cooperation between China and Europe on a number of infrastructure deals. While these meetings have attracted praise from many, they have also drawn scrutiny from others, having yielded few actual agreements and perhaps stoking disunity among the participating European countries.

Meanwhile, uncertainty reigns in post-Brexit Europe as the European Union and the United Kingdom seek to strike a lasting deal both with each other, and with their respective governments. After unveiling a draft proposal on November 14, several high-level resignations from the UK Prime Minister Theresa May’s own cabinet followed as both sides wait for a Parliamentary vote in that country on December 11. Still not a done-deal, it is hard to find any party happy wtih the current circumstances, with a high likelihood that the relationship between the EU and the UK will remain uncertain well into 2019.

And finally, after a year of negotiations, the North American Free Trade Agreement (NAFTA) is no longer, as the newly agreed-to U.S.-Mexico-Canada (USMCA) trade agreement becomes NAFTA’s replacement. While negotiators reached a deal late in 2018, President Trump, Canadian Prime Minister Justin Trudeau, and Mexico’s Enrique Peña Nieto only just signed the agreement at the G-20 Summit in Buenos Aires, Argentina. The deal will require ratification by all three countries’ legislatures before taking effect, while experts await the impact of this new agreement in the year to come.

What is clear from 2018 is that the institutions and agreements many have come to rely on—which affect the world’s most significant players in trade—are no longer as dependable as they once were to investors. But while this global shake-up is unmistakable, not all signs point to as much continuing turbulence next year.

President Trump’s rejection of the ambitious Transatlantic Trade and Investment Partnership (TTIP) lent a major blow to US and European trade relations. Though things looked bleak for most of 2018, some encouraging signs began to develop in the second half of the year.

Meetings between EU Commission president Jean-Claude Juncker and President Trump helped avoid a dreaded 25-percent tariff between the two trade partners. This certainly demonstrated progress, and if US growth stalls given the tension between the US and China (which may have abated amid mixed signals coming out of the Buenos Aires summit), it’s possible the Trump White House will see value in mending relations further between the US and the EU.

Africa has also seen encouraging economic growth over the past couple of years, and that’s likely to continue throughout 2019 given the volatility elsewhere. The continent remains a golden opportunity for private sector investors, with infrastructure and consumer goods flooding into the region. The ongoing housing crisis in Nigeria and Kenya also opens up the opportunity for creative housing solutions for real estate investors.

As concerns grow over climate change and sustainability, the cleantech sector will likely have a strong year in 2019 as investors will also continue to look for technological solutions to ecological problems. How artificial intelligence affects the economy as a whole is worth watching, and as the technology improves, it will likely only play a bigger and bigger role in the global economy.

Amid all of this uncertainly, however, the major question remains: “is growth poised to stall?” The last two years have seen encouraging economic growth around the world, but could that be coming to an end soon? With political turmoil on the rise in many places, along with less investment in some emerging markets, it’s possible that we could see an economic downturn in 2019 that sets the stage for a recession the following year, something many bankers predict. Already the IMF has lowered its projection for global growth to 3.7 percent, down from a previous projection of 3.9 percent.

Overall, an eventful 2018 set the stage for a fascinating 2019, with WTCA Members positioned to help navigate their local business communities through any oncoming turbulence. The increasingly protectionist stance of some major trading nations, and still-brewing tensions in other key blocs indicate the upcoming year in global trade and commerce will be full of both opportunity and complexity.

As a network we are ready for whatever may come.