World Trade Skids for First Time Since Financial Crisis

Exports by China, Japan, and Eurozone under pressure — in part because of globally weak demand for new vehicles, which transcends the trade war.

World trade volume – a measure of imports and exports of merchandise across the globe – declined in its zigzag manner in June to the lowest level since October 2017, according to the Merchandise World Trade Monitor by CPB Netherlands Bureau for Economic Policy Analysis. The index was down 1.4% from June 2018. This small year-over-year decline is the biggest year-over-year decline since the Financial Crisis, and it’s a reversal from the heady growth in 2017 and 2018 that had topped out at 6.7%.

A theme emerges: World trade, rather than growing in leaps and bounds as it had done during peak globalization in 2017 and 2018 (which had followed a period of trade stagnation in 2015 and 2016) has now entered its first decline phase since the Financial Crisis. But it’s still a relatively tame decline, reflecting the manufacturing slowdown in the US, the EU, China, Japan, South Korea, and other countries, and not a global crisis. What happened to trade during a global crisis is clear in the chart:

That this year-over-year decline is still so tame, despite the explosive trade-war rhetoric, pandemic threatened and actual tit-for-tat tariffs, and even tech embargos, is largely due to companies having found ways to brush off the rhetoric, dodge some of the tariffs, shift parts of their supply chains around, or push up the tariffs into their supply chains.

By comparison, what happened during the Global Financial Crisis was a “collapse” of world trade when companies – uncertain if the banking system would still stand the next day – shut down their ordering process. This was when American consumers lost their jobs by the millions and curtailed their spending, and when car sales collapsed. From September 2008 through the trough in May 2009, the World Trade Monitor index had plunged 17.5%.

But so far in 2019, there are no signs that the American consumer has pulled back. And despite the trade war, the index has declined only 3.1% so far from the one-month peak.

The US economy is dominated by services, such as finance, healthcare, information services (such as telecoms), professional services (such as computer programming, lawyering, and engineering), housing, and myriad others. And despite the manufacturing slowdown, services are growing at a solid pace. About 70% of what consumers spend their money on is on services, leaving the US as the cleanest dirty shirt.


China is experiencing a slowdown in exports that started last fall. In recent years, exports continued to rise from September through June. But not this time. Exports to the rest of the world fell 3.5% from September 2018 through June 2019, according to the World Trade Monitor data for China, which I converted to a three-month moving average to smoothen out the vary large month-to-month ups and downs of the data. The regular spikes in the chart are related to the Chinese New Year. Note the 24% plunge during the Financial Crisis:

But on a year-over-year basis, exports in June were up 2.3% from June last year and marked the highest June on record. So for now, the decline in exports since September hasn’t yet totally wiped out the gains earlier last year. But the trend is in the wrong direction.

Imports to China from the rest of the world show a similar but harsher picture: Imports in June fell 2.4% year-over-year and are down 6.8% from the peak in September 2018, which would be a sign of weakening internal demand in China:


Japan’s exports have been declining slowly but surely since the beginning of 2018. In June, on a three-month moving average basis, exports had dropped 3.0% from January 2018. But that drop pales compared to the export collapse during the Financial Crisis and the sharp drop following the March 2011 earthquake and tsunami, when Japan’s infrastructure was severely damaged:

But Japan’s imports have continued to meander higher. The three-month moving average of the index reached a new high in May and ticked down a smidgen June:


Exports from the Eurozone have declined since January 2018 – but only 1.7%. This was driven by a sharper slowdown in exports of German autos, auto components, and industrial products, softened by increases in exports from other Eurozone members, whose exports also include food, such as olive oil, salami, cheese, and other specialty foods, or wine, and there is no slowdown in food products.

Imports into the Eurozone have remained roughly flat since January 2018. The chart combines imports and exports indices. Note the big impact of the euro debt crisis on imports (red line) though it had little or no impact on exports:

So I get this picture of global trade: Companies are rethinking their supply chains. But actually shifting them from China to Vietnam or Bangladesh or even back to the US is a slow process that has barely started. And it’s a complicated process, shifting large scale manufacturing to countries whose manufacturing and export infrastructure is inadequate to manufacture and export on the scale of China. And so this will take a while.

And the global slowdown in demand for new vehicles – which impacts not only assembled new vehicles but components and materials that crisscross the world – is hitting exports from Germany, Japan, China, and South Korea. But that slowdown in demand for new vehicles is a result of other factors than the trade war, and in developed countries, and even in China, it is becoming structural and includes factors such as saturation. So even a resolution of the trade war won’t help the auto sector. Here are some samples of the challenges the global auto industry is facing:

China Auto Sales Spiral Down, But This Time It’s Different: Government Refuses to Bail Them Out with Big-Fat Incentives

Vehicle Sales Plunge amid India’s Shadow-Bank Debt Crisis & Contagion Fears

New-Vehicle Sales in the US Fall to 1999 Levels: How to Grow Revenues After 20 Years of Stagnation (Yup, You Guessed It)

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  56 comments for “World Trade Skids for First Time Since Financial Crisis

  1. Lemko says:

    CNH is gonna pop like a 3 day old pimple! Big Trouble in Little China

    • Wake2000 says:

      Wait and see!

      USA has been enjoying the fruits of the last Dem gov and global free trade . The Trump Raceme global Tariff and economic bullying effect will show its ugly head in next 5 yrs.

      USA consumers and business will feel that pain not just China. Already the USA farmers are suffering, the tartif hike has not trickled to the American consumer and business yet.

      China has modernized its infrastructure and made global in roads from Africa to Asia and South America. Trump and his giv has destroyed economies of countries it dies not likeand generated millions of poor and refuges . Current gov backs oil, gas and coal when global growing economies have chosen electric.
      USA will bleed and have winds fighting China and infac will make China a bigger power faster- wring approach I say

      • mike says:

        I hate to be on the same side as Trump. However, the Chinese communists have been abusing the USA with mercantilist policies for decades, only a little less than they have abused the rights of Uighurs, Falun Gong, etc.

        The US may bleed, but it will not bleed as much as the Chinese communists. They arrogated to themselves the position of leading world power when their economy is parasitic to the US and EU economies: it is based on sales to those countries that are subsidized by its government to drive US, EU, and other competitors out of business.

        They protect their cronies with ludicrous loans that will explode when their government supported entities and other, less directly supported entities run out of credit. I just hope that the communists are shoved out of power when the Chinese people realize that the communist party cadres have been parasites living off of the majority of the hard working Chinese people and making false promises, like banksters in the US.

      • Ed C says:

        Dude, you need to proofread your text at minimum. I can’t agree with anything you say, so there’s that.

  2. Joe says:

    No problem.
    Trudeau will just Jack up his new carbon tax to offset the lost tax revenue.
    It still shows too how the legal system does not apply to politicians and connected companies that know how to fix the system in their favor.

    • Paulo says:

      What does the carbon tax have to do with this article?

      • Lemko says:

        LOL I think he’s a bot

        • Joe says:

          Politicians are bought and I’m not a politician.
          I’m just a guy laughing at this current system that is more a computer game than actual real life
          I’m amazed at how communities build and build and forgetting that this crap needs to be maintained as they fall apart rather quickly.

        • Unless you are sitting in a shack somewhere using a solar panel you stole from the man, you are bought too.

  3. daniel weise says:

    Continental,Germany’s largest tire maker is shutting down 9 of it’s 32 Plants. similar cut backs are planed throughout much of Germany’s industrial sector. Heavily dependent on Exports while struggling with a ever growing social cost of dealing with millions of new immigrants (refugees) things look dire. i think Germany is the Canary for the state of global trade. the “trade war” is only adding fuel to the fire but was not the initial cause,this started six or more months ago as the global expansion finally started to run out of steam,just my uneducated feeling.

    • Realist says:

      The German consumer seems to keep shopping for the time being, but German exporters are having a not so fun time, because their customers abroad aren’t buying their products as they used to. Except the car industry, German industry does manufacture a lot of industrial equipment for export. If their customers abroad do not buy this industrial equipment what else does this tell in addition to the fact that the wheels of the World economy is spinning slower than they used to ?

      • Anon1970 says:

        I bought a new dishwasher a few days ago. I thought it was made by the elves in the Black Forest. But it was actually made in North Carolina. I suspect that most of the company’s high paying jobs are actually in Germany.

        • doug says:

          the dishwasher plant in eastern NC pays above average wages for the area. It has been a steady (and welcomed) employer.

      • From the Truth says:

        Not so. Germany manufacturers Additive manufacturing machines (EOS and others) that print metals. This is a very exciting area with lots of room for expansion.

  4. Unamused says:

    You know you’re in deep shit trouble when the fate of the world economy depends on the willful blindness of the overindebted, overexploited American consumer.

    Everything will be okay so long as they can hold off the coming depression long enough for the billionaire class to grab whatever’s left that’s not tied down and merrily slink off into the darkness.

  5. Paulo Zoio says:

    It seems every industry in the world is holding their breath waiting to see how this little Trump-Xi war unfolds and that’s why PMI for manufacture is going down but unemployment has been holding. Since it seems things are unfolding fast this last few days (Xi already nailed Trumps’s weakest point and is betting to make him loose 2020 re-election) next weeks will be interesting to see how unemployment numbers will follow…

    • Petunia says:

      The showdown with China was long overdue. Flyover country supports the president because who else could they support. The dems are on life support.

      Hong Kong is going to be the death of China because no western banker will risk potentially being jailed, tortured, or killed over a declined loan. China needs the gold it holds, just like Russia, because nobody trust them. They don’t even trust each other.

      • Nicko2 says:

        The DEMS did the best in decades at Midterms 2018, picking up wins in hundreds of down ballots races. 400 days, the tide will turn.

      • Old-school says:

        I don’t think people in urban areas really get the frustration in small towns.

        My small town in NC went from 70% white/ 30% black to around 35% white, 25% black, 45% Hispanic in 30 years with nearly all manufacturing jobs gone.

        It’s a bigger demographic change than it appears because most whites are old and most Hispanics are young so that early school grades are 75% hispanic. Most Hispanics are nice , hard working people but it is a lot of change for people to adjust to and they do not feel as if they had a say in the matter.

        Plus the way it was done by turning the eye to illegal immigration which means a lot of fraud on paperwork to be employed. It kind of discourages honest people from being honest rule followers.

  6. There is one answer to this and its not more money. You said something about Vietnam and Bangladesh (and dare say, Mexico??) Or it may be we allow the business cycle to work through (and 45 is only piling on, 15 yd penalty) but they will never do that. Let’s wait and see what the new La Garde has to offer??

    • Frederick says:

      Why waste your time LaGarde will offer nothing new just the same old failing ideas

      • No one knew who Draghi was, when he defined his tenure. Wait and see how she defines hers, and she is an outsider. The IMF is locked up tight, 45 cannot touch it. Can to guess what sort of insult he uses on her. Maybe something about the tanning salon?

    • Petunia says:

      According to the experts the only trick LaGarde knows is restructuring loans. That’s what will be on the table, more debt, longer terms.

      • daniel weise says:

        Yeah,but more importantly: will her personal Tanning Salon follow her to Brussels?

      • d says:

        FRAUD and Bailouts.

        A Bailout is not a true restructure.

        As there is generally a large haircut for some or all in a Bailout. Particularly when Mutton dressed as Lamb Legarde, is involved.

        She was incompetent and criminaly Negligent (we suspect paid to be) in the french Administration.

        She has been Mediocre at best at the IMF.

        Perhaps they gave her the ECB, as they need either a Scape-Goat, or a puppet, for the coming Eu financial Shitsstorm.

  7. Endeavor says:

    If the rest of he world would just widen their roads then they too could live in the pickup truck nirvana we do. And don’t forget about SUV’s too. They have to buy at least two new vehicles to equal the profit of one truck or SUV sale in America.

    • Rowen says:

      Brazil says “why can’t we have our Manifest Destiny and expand from sea to shining sea?”

  8. AU rising says:

    I take the slowdown in vehicle sales as an indicator of consumer confidence in the future. People who just survived through the Great-Not-A-Depression know they don’t want a big new vehicle payment hanging around their necks when they loose their jobs during the next slowdown. So, its better to get the current car fixed or buy used and wait for better times to come.

    Interesting of course is Detroit’s ability to constantly go the wrong direction at the wrong time. Detroit is ending passenger car production, and going for the more profitable and more expensive SUV and truck markets. And this at a time when consumers are pulling back from buying the big ticket items. During a downturn, being able to market cheaper low end cars could keep revenue flowing when the big priced SUVs are sitting on the lots. But Detroit obviously steers only using the rear-view mirror.

    And while, its nice for the lawyers and the expensive phone companies that services can keep overall economic numbers, but lots of real people have their jobs tied to that goods based economy that is going into recession. The interesting parts will be how those effects spread out into the rest of the economy. When do highly leveraged companies that provide services to people in the goods-based economy start to slump and fail themselves? First thing to go when that freight shipping worker gets laid off is those orders on Uber Eats. And when construction related jobs start to disappear due to lack of investment in the goods-based industries, and also due to falling home prices, that also spreads out and has an effect.

    • alex in San Jose AKA Digital Detroit says:

      AU Rising – Indeed. Uber Eats (I call all food delivery services this) and lunch trucks, etc are going to feel it right away.

      And the Great-Not-A-Depression generation are going to be very cautious indeed. It was bad enough for me in my 40s, imagine how life-forming it must be to people who were in their late teens or 20s. (For me the formative years were what I call the Starving Seventies, which were worse!)

      One thing that’s going on in my area is the recycling places are shutting down. Most of this is because our scrap is low-quality and the Chinese don’t want it any more. Collecting scrap is a whole industry here and there are tons of people who will be going even hungrier now. So spending goes down.

    • QQQBall says:


      I dont see any of that. I see peeps believing that the masters of the universe will keep all the plates spinning into perpetuity. In fact, the over-levered morons look at prudent people as idjits. Not only did they get saved, kept their property & borrowing power, avoided taxes on write-downs, etc., they were able to increase the speculation and made big multiples on real estate speculations.

      What I do see is middle-aged friends with barely 7-figure 401-k balances planning early retirement while waiting to begin SS until 70. If you think about it, walking away from a nice job with good vacation time and great benefits is kinda risky, unless you believe its never gonan end.

      • Old-school says:

        I agree that if you have a nice job keep it. Mine got to where it sucked so I retired at 50 with a small 401k. Don’t regret it at all.

        It’s good to run the numbers. If you make a lot and save a lot of money til you are 65 you are going to be giving a lot back to uncle same when retired but that’s ok if you enjoy your job.

  9. David Hall says:

    China electric vehicle sales declined in July. China all vehicle sales have been dropping for some time. Chinese and Indian governments reported growing GDP in spite of worrisome vehicle sales numbers.

    • cd says:

      India is running out of water…
      they are a very fragile place and Kashmir is their life blood,…
      that area is a powder keg…

  10. timber says:

    Given the timidity of the economic decline as suggested by Wolf’s article, I’m a bit taken aback by the gusto with which so many central banks are rushing toward/increasing NIRP…like its a crises or something, not a mild recession.

    Perhaps central bank fear relates to other issues in the background….or they’ve just gone more bonkers than usual.

    • Unamused says:

      . . . like its a crises or something, not a mild recession . . . Perhaps central bank fear relates to other issues in the background . . .

      They know what’s coming. And they know the degree to which they themselves are exposed to what is coming, even if they’re careful to avoid leaving too many tells for anybody else.

      It’s not a crisis, yet, but there has never been any way they could prevent it. The last crisis was never resolved, and only papered over with debt and by bankrupting millions of their victims. The best they could have done, and have done, is delay, until now NIRP/ZIRP is all they have left. And they have just about run out of time.

      • Double D says:

        Very true. There are limitations now on anything they do. It only prevents the inevitable for a little while longer. It’s finally the market forces taking over like a tsunami. Demographics, unfathomable debt from which we can never recover, greed & corruption. And now we’re at the penultimate climax of global destruction.

      • Frederick says:

        Very good analysis and I too am “unamused” by it all Got gold ?

  11. Joe says:

    Monetary Inflation has finally caught up to this social experiment where surpressing wages for profits has broken the middle class into the poor house. No extra money left for anything but necessities.

  12. MagicMoneyTreeBliss says:

    World trade charts look very much like most other charts as everything seemed to go euphoric at the end of 2016, and then it all turned at the beginning of 2018. If you look a the world GDP and China credit impulse charts, they took off around Oct 2016 and peaked around November 2017. China credit impulse saved us in late 2016, not sure they can pull it off again.

    Perhaps the inevitable (M)agic (M)oney (T)ree policy can fool us into global prosperity after the 2020 elections. Funny enough, the trillion dollar platinum coin idea back in 2010 gave us all the fantasy that we can get something for nothing, so thank the Treasury and Fed for such foolish constructs…

    • Old-school says:

      Charlie Munger basically said no body really knows how much money you can print before you blow up the system so the best thing is to make sure you stay way the he’ll away from that point.

  13. Brant Lee says:

    Friday, which was supposed to belong to the FED, turned into a circus quickly. Instead of a probable 300 rise in the Dow, it lost 600. Tonight, Sunday, the NIKKEI is sinking 400 and gold has pushed up another $20, silver pushing $18 already. There had better be some good tweets coming soon or look out Monday in America.

    • timbers says:

      Powell should raise interest rates .25% every time he Tweets criticism of him. We’d be at 25% or there about now.

  14. Future Historian says:

    The Baltic Dry Index is higher than it’s been at any point in the last five years. For China to buy soybeans from us, they now need to be shipped from the US to Brazil and then from Brazil to China, so that creates extra demand for shipping. How does this sort of thing affect the World Trade Chart? Would it be much lower after subtracting all the roundabout shipping routes to evade tariffs?

  15. unit472 says:

    Since my identity was stolen and a dozen credit cards issued with my account number but different names on them I am returning to the pre digital era. I now either write paper checks or pay bills by phone. No more on line transfers of money. I want to buy a new car but may have to settle for an old car and have its motor rebuilt. Don’t want chip-shit, heated seats and steering wheels ( l live in Sarasota so why should I have to pay for stuff like this?). Gonna find a typewriter too as a ribbon for those costs what $5 as compared to $50 plus for ink for a printer. I can fill out documents with a typewriter, scan them and email them. Wish I could find a old cellphone too that was just a phone and text capable. Don’t want to watch TV or have Google, Facebook and the FBI monitoring me.

    In short I don’t want to participate in the ‘modern world’ anymore.

    • Richard says:

      Thanks for the post.
      I too try to live as much as possible in pre-digital age.
      Much more tranquil existence and self determining as well.
      Have to know how to be self sufficient and plenty of informed online videos which help with things such as gardening for food production and for all those day to day things needing fixing.
      Nice feeling to just sit in backyard and watch the wildlife show up after daily chores are done. Keeps things in perspective.

    • Old-school says:

      Best thing I ever did was find an old house in the country and rent it for next to nothing. Got rid of internet, cable, tv. Just kept a smart phone. Great neighbors and view. Most of modern stuff doesn’t improve my life. Air condition and microwave are winners.

  16. Augusto says:

    I have a feeling like everyone is running on a tight rope. The moment you slow down or stop you are liable to fall off or crash. Not scientific, but everything and everyone seem stretched, and with world trade slowing…..

  17. d says:


    World trade and housing markets have a common feature.

    They go UP or DOWN (Sometimes down like 08/09).

    Rarely do they go slowly sideways .

Comments are closed.