World trade hit by collapsing demand

The global downturn is tightening its grip. Over the past few months there has been a "dramatic" slump in trade, said Ambrose Evans-Pritchard in The Daily Telegraph. All major economies are affected, with US trade activity (imports and exports) down 7% year-on-year in November, and 18% since July.

Japanese exports posted a record decline in November and its overall trade was down by an annual 20%. Chinese trade slipped 9% – it looks set for a hard landing, the World Economic Forum warned this week – and Germany's was down 7%; the four biggest EU economies' exports tumbled by 10% in November alone. Asia is also suffering, with Korean exports down an annual 30% in January.

Trade between Asia and Europe is "an unmitigated disaster", said Charles de Trenck, with some shipping brokers now effectively waiving fees to transport containers. Asian trade to Europe and the US will fall by up to 12% and 7% this year, said de Trenck. Outbound traffic from America's top two ports, Los Angeles and Long Beach, is down 18% year-on-year. "This is no regular cycle slowdown but a complete collapse in foreign demand," said ING's Lindsay Coburn. A dearth of credit to back up trade deals has also hampered global exports. The World Bank now thinks trade could fall by 2.1% this year, the first fall since 1982.

Heading for the 1930s?

We should keep a close eye on trade figures over the next few months, said Martin Hutchinson on Breakingviews. The 66% decline in trade amid mounting protectionism is "what made the Great Depression Great". Averting a "1930s-style death spiral" in trade may soon become "the world's top priority".