Navigating the Uneven Path to Global Trade Recovery
James Stirk, CEO, Tradeshift
The path to global trade recovery was never going to be easy. After two straight quarters of solid upward momentum, the results of our Q2 Index of Global Trade Health inject a dose of reality into the overall improving outlook.
Transaction volumes across the Tradeshift network have been inching closer to normalization against expected levels over the past six months. However, trade activity remains three points shy of the anticipated level in Q2, so the champagne will have to stay on ice for another quarter.
A steep reversal in ordering activity dashed hopes of ending an eighteen-month sequence of lower-than-expected growth. Order volumes fell six points below the expected range in Q2, having peaked at five points above the expected range at the end of 2023.
Is global trade about to slip back into reverse gear? We believe this is unlikely. It’s more probable that ordering activity is leveling off after accelerating at a rate that would never be healthy or sustainable in the long term. Supply chains may benefit from this cooling off, giving suppliers time to adapt to a new rhythm.
This quarter’s report highlights a widening performance gap between the US, where activity levels exceeded expectations, and Europe, where trade activity remains three points below the baseline. Europe continues to feel the effects of price pressures triggered by the war in Ukraine and weakened demand for manufactured goods. Conversely, the United States’ secret weapon is a robust domestic economy. High consumer confidence underpins this, though another four years of uncertainty now seems assured, whoever wins the presidential election, given the unpredictability of Trump’s decision-making and Biden’s health, could disrupt domestic and international stability.
China is also at a critical juncture. Transaction volumes grew above expected levels for the second successive quarter. Unlike the US, where trade activity has been stable, China’s recent growth follows a turbulent two years of sharp declines and false dawns. To maintain its position as the world’s leading manufacturing hub, the country must accelerate its trade volumes amidst rising competition from new players.
The US-China trade war has highlighted the risks of over-reliance on China, prompting businesses to diversify their supply chains. Countries like Vietnam, Malaysia, and India are benefiting from this shift. Our data shows transaction volume growth in these countries is outpacing the global average.
The increasing competition among global powers is fragmenting the global economy, with clear winners and losers emerging. At the business level, success will depend on how quickly organizations can establish new trading relationships without getting entangled in a web of tariffs, taxes, and regulations. Despite formidable challenges, significant opportunities await those who navigate this transition successfully.
Learn more in the Q2 Index of Global Trade Health
