An outlook for the year ahead will inevitably be a bit hazy. Today, we delve into the biggest trade challenges and opportunities facing the trade industry across four industries in the coming year.
On top of the pandemic grinding the economy to a near-halt, there have been other political factors at play. Firstly, the UK famously departed from the EU through Brexit. And although there is some hope that China and the US may find a way to resolve their recent stand-off over tariffs, the trade war was quite devastating for both parties. From the look of things, “trade war act 2” will not be nearly as harsh as “trade war act 1”.
There are other potential flashpoints for trade disputes – protectionism often creates unexpected winners and losers. In a piece by Joanna Konings, Senior Economist in International Trade Analysis at ING, she shares her predictions and main elements to consider around US trade.
The four key factors in US trade in 2021 are as follows:
- The advent of the COVID vaccine
- A look at trade wars
- Economic challenges due to the pandemic
- A positive outlook…
The Advent COVID-19 Vaccine:
The vaccine will prevent the further spread of COVID-19, but there will be a lag as it diffuses through the world population (herd immunity). It will likely take quite a while for trade volume to bounce back to pre-pandemic trades.
ING initiated an economic forecast, stating:
“We forecast a 7% fall in goods trade volumes in 2020 followed by growth of around 5% in 2021, to reach pre-pandemic levels in early 2022.”
The pressure is certainly on now for businesses to sort out their supply chains and prove their resilience. Of course, increasing supply chain resilience is not a simple task, but the payoff is there.
In an interview at the beginning of the pandemic, we interviewed our President and Founder, Adam Lewis on what importers should do to learn from this:
“Ensure preparedness: importers are buying more overseas products than ever — due to the low cost. However, we’ve seen it time and time again, importing a new product without doing the right homework can get expensive.
It’s important to us to keep a close relationship with our customs and trade consultants, so we can help importers make the right decision. It’s ideal that you loop in professional consultants into the process so they can help you calculate risk and landed cost, because actually placing your order. This’ll save you cash in the long run.”
A Look at Trade Wars:
Even though we are under a new presidential administration in 2021, the US’s 25% tariffs (plus 10% tariffs on products subject to Chinese retaliation) on $250 billion of US-China trade flows remain in place.
In the latest update, China proposed lowering duties on 95% of imports from the US by 20%; the offer was rejected, and talks have not been scheduled again. The US continues to impose its tariffs and apply its “national security” exceptions to other countries.
Economic Challenges:
The WTO has appointed new chairpersons for 2021, and they have a tall order ahead. (You can read about the chairs here.) Various trade war disputes are currently being processed by the WTO’s courts.
- The US steel and aluminum tariffs.
- There is also a dispute with China about the use of state subsidies.
- Fair allocation of COVID-19 vaccines is key to a global recovery in 2021 — and prospects for multilateral co-operation thereafter.
Progress on these difficult issues is required to avoid future trade wars and to revive the economy.
A Positive Outlook…:
While the global economy grows back to side thanks to world trade, there is no denying that it is susceptible to numerous market challenges and opportunities ahead. Konings look at 2021 trade ends with a positive prediction:
“But in spite of the challenges and risks, cautious optimism for 2021 is warranted as economies are set to recover and trade policy may be done through talks, rather than tariffs.”
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If you’d like to see what a partnership between a customs broker and an importing business can look like while navigating 2021, click here to start a conversation.
