If ever there were something that could put a permanent damper on global trade it would be the ongoing COVID crisis. Sure, things slowed down at the peak of the crisis, but global trade continues its strong recovery. Recent news events attest to that.
One such event is the reopening of one of the world’s busiest container ports in China. After being shuttered for two weeks following a dockworker testing positive for coronavirus, the Meishan terminal is up and running again.
Container volumes flowing out of China continue to tick upward. There is hope that ongoing shortages of things like computer chips and aftermarket car parts will be history soon enough. And why not? The value of international trade set a new record in the second quarter.
Buying and Selling Continues
Vigilant Global Trade Services, a global trade management company based in Ohio, says most of their clients are doing well considering the effects of the pandemic. They say buying and selling continues across the world, a sentiment echoed by the Organization for Economic Cooperation and Development and the European Commission
Data suggests that the total value of merchandise trade now sits about 5% higher than it was prior to the start of the coronavirus crisis. That means consumers are buying more than they were pre-pandemic. And when they buy, imports and exports remain strong.
Here in the States, a surge in consumer demand is being observed in our own ports. The number of containers processed by the Port of Los Angeles in July 2021 was 4% higher than in the same month last year. Meanwhile, a new container handling record was recently set at the Port of Long Beach.
Wondering Whether It Will Last
It is hard to imagine the scope of global trade if you are not in some way involved in it. Numbers provided by a global trade management company don’t tell the whole story. You actually have to see global trade in action to fully appreciate its volume.
With that said, are there any causes for concern that the data isn’t showing us? Possibly. There are those who wonder whether or not the current boom will last. Two potential concerns are commodity prices and stock market volumes.
While the volume of imports and exports has certainly increased, their combined value is an equally important factor. And according to the data, record value these days is due in large part to higher commodity prices. Companies are paying more for the same volume.
Elsewhere, stock markets are approaching record levels. The NASDAQ recently eclipsed the 15,000 mark for the first time. Both of the S&P and Dow are close to eclipsing their own milestones. What does it all mean?
Acceleration May Be Too Fast
Economic experts like to pay attention to acceleration as much as economic growth itself. It is great that global trade volumes are up. Rising commodity prices and robust stock markets are also a good sign. But if they are all accelerating too quickly, we could be in for a bumpy ride in the not-so-distant future.
Economic acceleration is a lot like accelerating in a car. There is a point at which a car’s rate of acceleration becomes dangerous. Step on the gas too hard and you could lose control of your vehicle. It is no different in the economic world.
COVID has not proven a worthy adversary for global trade. It has not kept global trade down. On the other hand, our aggressive response to COVID may be setting us up for a future crash. It is something we have to pay attention to.