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U.S. exports last month declined at their steepest pace since the Great Recession.
U.S. GOODS EXPORTS FELL off a cliff last month, as the global economy froze in the wake of an ongoing coronavirus pandemic that has sickened more than 1 million people in the U.S. and more than 3 million around the world.
Exports of U.S. goods plummeted roughly 6.7% in March – their most significant decline since the world was in the throes of the financial crisis of 2008. Shipments of American automotives were down nearly 18% last month, while industrial supply shipments dropped 7.5%.
And exports are warning that this is only the beginning of international trade disruptions. Historic economic weakness is expected in the coming months at home and abroad as the world only gradually reawakens from a commerce freeze that saw nonessential businesses shuttered in several countries across the globe. Demand for personal protective equipment and medical supplies has never been higher in many cases, but most other sectors have been adversely impacted by global factory shutdowns and depressed consumer demand.
“The coronavirus pandemic is set to have a massive impact on world trade,” Adam Slater, lead economist at Oxford Economics, wrote in a research note on Tuesday. “Steep falls in industrial output will hit trade in goods hard, while the unusually service-driven nature of the emergent recession also means services trade will plummet.”
The trade deficit spiked 7.2% last month as imports of international products into the U.S. contracted at a slower pace than the country’s exports. Imports were down just 2.4% – also led by a 9% decline in automotive shipments. Consumers are widely believed to have put off significant purchases of cars and other relatively high-priced items, given the world’s general state of labor market and economic upheaval.
With a slow recovery expected in the months ahead, analysts predict 2020 will be the worst year for international trade at least since the global financial crisis, and possibly even worse than that, given the sheer number of industries that have been affected by the coronavirus outbreak. Slater predicts global trade could contract by as much as 15% this year, compared with a 10% decline during the financial crisis.
“On top of this, we need to factor in the effects of export bans and other distortions in the medical sector,” Slater said, acknowledging a slew of world leaders, including President Donald Trump, who in recent weeks has aimed to prevent certain in-demand medical supplies from being shipped internationally.
The trade slowdown is also likely to severely hamper commitments outlined in the partial U.S.-China trade deal signed in mid-January. Trump has for months touted his success in ironing out a deal with Asia’s largest economy, but China’s commitments to import agricultural and other products from the U.S. now appear to be nearly impossible to meet – despite the fact that the worst of the coronavirus outbreak now appears to be over in mainland China.