Moody’s: Global trade improving, but delayed trade talks worrying

KUCHING: Trade activities across the world is improving from the troughs of April and May, with China leading the upswing but a rise in the Coronavirus Disease 2019 (Covid-19) infections poses new risks to the recovery of trade flows and will delay trade negotiations across the globe, Moody’s Investors Service said in its latest Global Trade Monitor report for August 2020.

“Global trade is staging a synchronised improvement across most countries after weakness in April and May. Nevertheless, trade activity will pick up only gradually, driven by a slow rebound in consumer demand over the rest of 2020.

“The risk of a widespread resurgence of Covid-19 infections has risen, which could cause renewed lockdowns and supply chain disruptions. As countries focus on battling the Covid-19, trade negotiations will become even more challenging.

“While the US-China phase-one deal is likely to remain in place until November, most other trade negotiations are likely to be delayed, including phase two of the US-China agreement, and US-EU, UKEU, US-India, RCEP

Global trade is staging a synchronised improvement across most countries after weakness in April and May. Nevertheless, trade activity will pick up only gradually, driven by a slow rebound in consumer demand over the rest of 2020. Moody’s

and AfCFTA trade talks,” it said in its report.

“Barring a second wave of infections and renewed widespread lockdowns, we expect that the global economy experienced its worst shock in 2Q and will commence a slow and bumpy recovery in 3Q,” it added.

Moody’s also noted that a pick-up in activity and stronger demand across developed countries could support improvement in emerging markets activity

“Nevertheless, there remains a high risk of a second wave of infections that is not contained and a renewal of widespread lockdowns,” it warned.

Aside from that, it noted that the pandemic would likely to accelerate the move to more localised supply chains, which was already occurring in the auto and electronics sectors.

“Government initiatives will support shifts toward domestic production of critical goods such as pharmaceuticals and food.

“The pandemic could steer production closer to end consumers, making it more resilient to sudden shocks in global supply chains. Nevertheless, companies’ strategies to strengthen supply chains will balance cost considerations with revenue assurance.

“Data flows and trade in digital services will continue to rise as more consumption and work shift online, focusing governments’ attention on digital tax initiatives,” it said.