There has been considerable angst about global trade weakness over the past 12-18 months. The weakness partly reflects a deceleration in overall global growth, and has coincided with an escalation in protectionism and threats of further trade retaliation. Protectionism is worrisome, but the slowdown in trade needs to be put in a longer-term perspective: trade growth has been sluggish for most of the decade reflecting many powerful longer-term force.
There are a number of structural tailwinds that had triggered strong trade growth until earlier this decade. These effects have petered out, particularly the rapid industrialization in China that had sparked an investment and commodity boom. Moreover, some newer headwinds to trade from technology advancements and shifting patterns in consumption have taken hold, although these are not bearish for overall global demand. To this end, witness the widespread resilience of the service and consumer sectors in the past year.