Export-Import Trade Loss In 2020 Could Approach $1 Trillion, If History Provides Guidance

U.S. trade would decline almost $1 trillion in 2019 if it falls at the same rate it did in 2009, when the global economy was reeling from the crisis that originated with the U.S. mortgage market.

The coronavirus pandemic now sweeping the world is the third major jolt to the global economy in the first two decades of this century. And while it might appear to be the most vexing at the moment, it is certainly way too early to know, or to know the impact on trade specifically.

It’s almost certainly true that the global supply chain is more resilient and nimble than it was a decade ago — and certainly two decades ago, when we experienced the first jolt to the global economy, the Sept. 11, 2001 terrorist strike on New York City and Washington, D.C.

But in the same way that it is difficult to project the depth and breadth of this strain of coronavirus relative to two previous strains, SARS and MERS, so to is it difficult to compare this jolt to the global supply chain and export-import trade to the two earlier crises.

Within the last couple of days in this fast-moving crisis, we witnessed new strains on the system, things we could not have imagined just a few short weeks ago.

On Thursday, two large container terminals at the massive Port of Houston were temporarily shut down a worker tested positive for coronavirus. My guess is this will not be the last time this happens.

The Port of Seattle closed two of its four terminals because of a lack of volume. PortMiami temporarily went to reduced hours at two terminals. Watch for more of this.

Toss in a crisis in the oil markets, precipitated by Saudi Arabia’s decision to glut the market after failing to convince Russia to limit output, which is in turn laser-focused on crippling the United States’ oil industry.

During the last two crises, the United States was not a major oil producer. Today, it is the world’s largest — and it is the country’s third most valuable export. Gasoline ranks second, behind only aircraft. That’s Boeing, of course, and things are hardly going well there, either.

In addition, there is a imbalance in empty shipping containers, created by a new logistics calculus and China’s desire to more closely inspect inbound shipments now it thinks it has its arms around the virus that was first recognized there late last year.

There will also be great challenges created by the U.S. restriction of passenger flights in the U.S.-Europe trade lanes, since about half of all air exports and imports flies in the bellies of passenger jets as opposed to freighters, which have no passengers.

The good news is that at least two airlines, Delta and American, have stepped in and are flying passenger jets without passengers, to keep their planes flying and cargo moving.

Another piece of news that isn’t terrible is that restrictions either in place or going into place on the northern and southern borders, with Canada and Mexico, will have limited impact on trade, since less than 5% of that trade is via passenger jet.

Nevertheless, given these gathering storms, returning to any sense of equilibrium is not simple.

It is not as simple as buffeting the financial system — which was far from simple in the aftermath of 2008-2009 mortgage-led crisis. Nor is it limited to reassuring the American public that another attack was not forthcoming, the primary challenge after the 2001 terrorist attacks.

It’s also hard to compare 2001 to what we should expect in 2020, since that attack came so late in the year. Trade that year fell just 6.49%, which would equate to a $270 billion decline in U.S. trade this year.

That’s not nothing but it pales in comparison to the $948 billion loss the United States would experience if it fell at the 22.87% rate it fell in 2009. Trade would fall from the 2019 total of $4.14 trillion to $3.19 trillion, the lowest total since 2010.

There is a silver lining to all this.

In both 2002 and 2010, trade rebounded rapidly. In 2010, trade grew at 22.05% — remarkably close to the 22.87% it had fallen the previous year. In 2002, trade fell slightly, less than 1% but the next year, in 2003, increased 6.87%.

If you’re too young to remember, trust me when I tell you, there was deep pessimism about the economy, the markets and our way of life in those first two crises.

Perhaps this one is different, perhaps we won’t recover. But I’m betting we will find our way out of this one, too, stronger than ever, more resilient and more prepared for what’s next.