A Look at Global Trade During 2020 and Moving Forward

Cargo ships entering one of the busiest ports in the world, Singapore.The year 2020 has been a bit of a wild ride. Well, that’s certainly an understatement. For many people in this country, the year has been filled with nightmarish rollercoaster-like ups and downs, twists and turns, and probably some machine malfunctions, ungreased gears, and loose screws. And yet, America—being the resilient and robust economy that it is— continues forward and marches on. So while every industry, every person, every sports team, business, and school is being, in some way, affected by changing regulations and people’s sudden hypersensitivity to personal space and hygiene, the global market is also seeing its effects. According to some reports, the global economy is seeing the sharpest reversal since the Great Depression. The drop was quite dramatic in the early months of the shutdown and has seen some steady recovery since. 

The Ever-Changing Markets 

If you are in the business of exporting or importing goods, you know that the market, regulations, and tides of trade are always shifting and ebbing and flowing. This year was specifically turbulent because of unprecedented circumstances. As of April 2020, 6.6 million Americans were seeking unemployment benefits. This has, of course, great implications for the domestic economy and will see the ripple effects moving through the whole of society pretty soon. The pandemic has certainly upended many international trade flows, though the U.S import and export movement must continue. It has certainly made countries think much more carefully about who they are trading with and how they conduct business abroad. 

China is, of course, coming under fire from many countries including the U.S and India. As of June of 2020, many Indian businesses were all boycotting Chinese products. India has already banned certain products, apps, and other items from China. In April, Japanese officials injected $2 billion to boost domestic manufacturing. Other countries, as reported by US News, like France have expressed their need to refocus their trading partners and reassess their relationship with people from China. White House economic advisor Peter Navarro told reporters that he thought, “We are dangerously over-dependent on a global supply chain.” 

These movements have led many to report that nationalism and more nationalistic trade policies will emerge the victors after the smoke clears. As Forbes reports, there have already been several reports to block exports of certain items. And this, according to them, might lead governments to be a lot more selective about what they deem essential exports and imports. 

Impact on Imports and Exports 

The pandemic has also had significant effects on imports and exports; it has disrupted supply chains, reduced trade volumes, and limited product availability. While this causes concern for traders, it doesn’t mean all of it is dismal news. Because all markets are interconnected — from Europe to India to the U.S — a disruption to one part of the chain will often have some effects on the other. 

Some analysts are predicting that returning to normal will be a difficult fight. Many believe that the outbreak has permanently altered the global flow of goods and services. The pre-coronavirus norms seemed to have open free-flowing trade across global markets, as globalization seemed to be the 21st century way of trading. The political popularity of globalization has suffered quite a bit and many countries are looking for ways to remain a little more conservative on their trade, or, at the very least, have much more discretion on who they trade with. 

And so while pre-corona trade patterns may not return, international trade, imports, and exports will continue to be a large part of the U.S economy as we continue trading with our allies and close trading partners. There is no question that the pandemic has brought about a change in the international markets, but exactly what kind of change is yet to be seen. Other industries like pharmaceuticals might see their changes as well, as countries begin to kickstart the production of some of these goods in their own borders. In the U.S, according to Market Watch, imports fell 6.2% but U.S exports fell even deeper with 9.6%. 

The U.S trade deficit also widened by almost 12% in March as international flights were not allowed to fly, which froze the global tourism. At the same time, the exchange of goods was also affected. The U.S exported fewer cars, aircraft parts, and barrels of petroleum. 

As far as the big picture is visible right now, some segments of international commerce are faring better than others. For example, trade in medical supplies and food, but the global petroleum market has been hard hit. The movement of electronic goods like iPhones has also decreased dramatically. And while the recovery of the global economy might take some time, there will not be a shortage of need for international trade, especially in certain industries. There has been some decline in freight and cargo shipments for a variety of reasons including the fact that many companies have had to shut their doors and many ports and transportation workers were either sick or unable to return to work. 

In these uncertain times, you need to have a brokerage you can trust. Here at Cordova Brokerage, we are entrenched in the movements of the markets and global trade in order to provide our clients with the latest information and pertinent changes. If you are importing or exporting goods, things might seem a little chaotic. Find a brokerage you can trust to walk you through the ever-changing markets, regulations, and compliance restrictions. 

 

An Overview of America’s Imports and Exports

two businessmen shaking hands with a shipping yard in the backgroundSince the beginning of the country, the trajectory and nature of imports and exports have changed dramatically in the United States. The U.S went from being quite protective and isolationist in its approach to favoring a more open and free-flowing market that led the way to modern foreign relations many today would term globalization. Each has accompanied the very different cultures and customs of the time. The change was, in large part, brought about by global conflicts that changed the way nations exchanged goods with one another. Post-war America began to see open trade as a way to open up countless possibilities to advance the country’s economic interests, as well as establishing strong ties with foreign nations. 

Some of the country’s founders had differing ideas about the ideal trade policy. Alexander Hamilton, for example, was far less of a protectionist that he is often made out to be. He knew the importance of the import market and how that could help fund the public debt. He had much milder tariff policies that found the support of traders and merchants of the time. Others, like Thomas Jefferson and James Madison,  considered much more draconian trade policies and seemed to purport a more domestically focused economy. Interestingly enough, when he became president, Jefferson imposed an unusual trade policy, which had a nearly complete embargo on international commerce from December 1807 to March 1809. This was a short-lived experiment that showed what it would look like to have an almost complete stop to international trade. This embargo, along with effects on trade from the War of 1812, is often said to have further sparked the rapid industrialization of the country and encouraged domestic manufacturing. 

The Early American Isolationism 

In the early days of American history, Americans seemed to have a ‘leave me alone,’ attitude. In large part, Americans still hold this attitude, as it is greatly inculcated in our nature and our country’s culture. Even after World War I, America slowly returned to a more isolationist foreign policy. The war, after all, had brought with it a very large unpaid debt, as well as a generation of men scarred by the war. And by the mid to late 20s, foreign policy was not something on most people’s minds.   The Hoover Administration set forth the Hawley-Smoot Tariff. Because trade was a large arbiter of foreign relations, the tariff was a way to cut off the discussion altogether. This caused a lot of foreign retaliation that contributed, at least in some part, to the economic downturn that gripped the U.S and the world in the late 1920s. 

At the London conference of 1933, Rosevelt refused to tie the American dollar to a gold standard. This upset many European leaders. At the same time, Roosevelt realized that the Hawley Smoot Tariff was crippling American economic growth and the U.S made the policy more flexible. 

Trade Policy After World War II

The breakout of World War II was of course another cataclysmic change to the world and the global markets. The United States, unlike Britain and other Ally countries, did not have their industrial centers and cities bombed and therefore did not suffer the kinds of losses to their manufacturing that other nations did. This opened the way for the United States to manufacture a lot of necessary parts and materials for the war effort and otherwise. The U.S dominated many export markets after the war because the manufacturing centers were intact, this allowed for innovation and technological advancements, and due to inherent strengths in numbers of workers and the growth of several industries. All of this set the United States up for success in a global market by the time the war was over and countries were trying to rebuild their cities and lives. U.S aid was important to this recovery and these nations also needed export markets in order to return to economic independence. The U.S helped create the General Agreement on Tariffs and Trade, which consisted of an international code of tariff and trade rules that was signed by 23 countries in 1947. 

In the 70s, the U.S trade balance was hurt due to some externalities like the oil price shocks, global recession, and increases in the foreign exchange value of the dollar. The American demand for foreign goods meant that America demanded a lot of imports. 

Still in the 1990s the nation remained committed to free trade and pursued to establish new multilateral trade negotiations, worked on new trade negotiations that involved Europe and Latin America and worked to solve other trade disputes. For a large number of people in the U.S, the idea of free trade means the liberal movement of goods across nations and the world. This opens up opportunities and markets and allows for better relations among nations. 

The nature of the current trade agreements and trade policies might be called into question after the world fully recovers from the 2020 coronavirus pandemic. This might return some manufacturing and production to the United States, or perhaps curb China imports some.  

The history of the United States trade policy shows how the country began and how it grew slowly as the world grew with it. Because of some of the global conflicts that gripped the 20th century, the U.S benefited and was able to build a great production machine with a lot of trade potential. 

Get With A Brokerage You Trust

Here at Cordova Brokerage, we are on top of all the changes and nuances of the U.S import and export business. It can get complicated following the many restrictions and compliance requirements. If you are looking to get into exporting goods or need brokerage services, we are here to help. Call us today.