EXECUTIVE SUMMARY
- A contraction in global trade in Q2 2022…With the omicron crisis in China prolonging supply-chain bottlenecks and bringing port congestions back to the worst levels seen in 2021, global trade of goods in volume terms should decline by -1.3% q/q. Overall, we now forecast global trade to grow by +3.5% in 2022 in volume terms, down from our previous forecast of +4.0% (and much below consensus ranging between +4.5% and +5.0%). In value terms, global trade is now set to grow by +10.4% in 2022, with the trade price component more than three times higher than what we expected before the war in Ukraine and the lockdowns in China.
- …But China’s mild reopening will help the trade recovery. Global trade should grow by +1.1 q/q in Q3 2022 and +0.8% in Q4. Barring renewed large waves of Covid-19 infections, we expect stringency at the national level in China to normalize in July – even if the zero-Covid policy remains a risk. This means that industrial activity should recover mildly, and manufacturers dependent on Chinese goods could experience some relief in the fall as it will take two to three months for port congestion to normalize.
- Improving supply from China would bring the largest production boost to the agrifood, pharma and software & IT services sectors in Europe and the US. Using our proprietary database to map out global production chains that involve Chinese suppliers, we estimate an increase by over +5% for each sector in the second half of the year compared to last year’s levels. This boost in output should be sold or stocked, the latter helping to reinforce the inventory buffer against potential future shocks (e.g. if the zero-Covid policy is maintained throughout 2022 in China).
- Among major Western economies, Germany could see the largest GDP boost thanks to the improved access to inputs from China. Our analysis of importing countries, supply-chain links and the sectoral breakdown of value added reveals that the Chinese reopening could help German GDP grow by up to an extra 0.5% in 2022 – all else being equal and assuming that the activity boost fully materializes in additional output through consumption or inventory. In France and the UK, the benefit to GDP would reach up to 0.3%, as their share of the manufacturing sector is lower
