Virus Hit to World Trade Much Worse Than U.S.-China Row, Allianz Says

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The coronavirus epidemic and the attempt by governments to contain it may slash about $320 billion off global trade each quarter while it lasts, delivering a much bigger hit than the dispute between the U.S. and China, according to research from Allianz SE.

Measured by volume, trade is likely to contract 2.5% in the current quarter on an annual basis and continue shrinking in the three months through June, according to research led by Ludovic Subran, the chief economist at Allianz, which is Europe's biggest insurer.

“In other words, in one quarter, global trade already suffered from the equivalent of the full-year trade war between the U.S. and China in 2019,” Subran wrote in a note published Thursday.

Assuming a “V-shaped recovery scenario,” trade volumes should recover in the second half of 2020 and grow 0.4% for the year as a whole, according to the research. But in dollar terms, global trade will likely shrink in 2020 as it did in 2019 because of falling commodity prices and “the appreciation of the dollar in a context of high uncertainty.”

Among the indicators of plummeting trade in goods and services are shipping and tourism, according to the report. It said the number of cargo ships departing from China has dropped by almost 50% in the past four weeks, while tourism will likely suffer losses amounting to $125 billion.

To contact the reporter on this story: Ben Holland in Washington at bholland1@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Sarah McGregor

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