The latest Global Trade Update from UNCTAD projects that global trade will contract by 4.5% in 2023. This dip brings the total value of global trade below the $31 trillion mark, $1.5 trillion lower than in 2022.
A noteworthy trend in UNCTAD’s analysis of current trading patterns is the concept of ‘friend-shoring.’ Countries are increasingly aligning their trading patterns with geopolitical allies. The chart shows the average change in bilateral trade between countries who are either geopolitically close, distant or very distant. UNCTAD uses UN voting patterns to categorise pairs of countries into each of these three groups. The chart shows the change in the trade share of each of these groups with Q1 2022 as a starting point. Note that data excludes services and intra European Union trade.
Overall, since Q1 of 2022, trade between countries that are geopolitically close has increased by over 6%, whereas trade between countries that are geopolitically distant decreased by 4.4%. Bilateral trade between countries classified as very distant, trade decreased by 5.1% from Q1 2022 to Q3 2023.
The outlook for 2024 was “highly uncertain and generally pessimistic”, UNCTAD said. Adding that “…while certain economic indicators hint at potential improvements, persistent geopolitical tensions, high levels of debt, and widespread economic fragility are anticipated to exert negative influences on global trade patterns”.