Are You Ready For a Bounce in Global Trade in 2024?

by Dan Minutillo, Partner

  • International Trade Law

The World Trade Organization (WTO) is the best-known international entity dealing with rules of global trade. The WTO creates and modifies global trade agreements and serves as a forum for negotiating trade agreements and settling trade disputes between countries. Free, stable, international trade is the goal of the WTO. The WTO has access to data to predict global and regional growth.

The WTO and other world trade organizations predicted three to four percent global trade growth in 2024. This prediction is revised upward from earlier trade growth predictions. Remember that 2024 growth predictions may be somewhat skewed because rising inflation and high-interest rates in the EU and the US during the fourth quarter of 2022 dampened global trade growth in early 2023. Therefore, the year-to-year (2023 to 2024) growth comparison is misleading. Nevertheless, it appears that 2024 will top 2023 regarding the movement of goods and services globally, i.e., international trade.

As we’ve seen in 2023, the US Federal Reserve (FED) and the European Central Bank (ECB) raise interest rates to attempt to lower seemingly unchecked global inflation. The result is high borrowing costs and less borrowing, which, in turn, slows growth and related international trade. With inflation easing worldwide, the FED and ECB slow interest rate increases. More borrowing and more GDP worldwide growth means more international trade—until inflation and the interest rate increase cycle starts again.

In early 2023, companies scrambled to shore up their supply chains devastated by disrupted manufacturing and related global transportation of goods due to the pandemic. Companies also had to cope with high inflation, increased interest rates, radical “real property” deflation, particularly for commercial property, and expected company bankruptcies. To make matters economically worse, the PRC (China) cracked down on alleged real property related corruption and imposed more anti-fraud government restrictions on business, which benefited the ruling Party, resulting in a GDP slump in China, affecting the global supply chains of most companies in the world.

Specifically, the first six months of 2023 evidenced decreased global trade of manufactured goods made of iron and steel, office and telecom equipment, and textiles. One of the few bright spots in early 2023 was an unanticipated surge in global auto sales.

Absent unforeseen geopolitical upheaval resulting in the rise of authoritarian, populist leaders who may cause disruption in supply chains for political gain, 2024 should realize a growth in global trade for machinery and consumer durables led by growth in North America.

However, according to the International Monetary Fund (IMF), most Asian countries will see a slight downward trend in global trade in the first half of 2024 due to a retraction in GDP forecast to be almost a half percentage point (IMF predictions). Still, the Asia and Pacific Asia area will top four percent in 2024, a respectable GDP growth rate.

As fuel prices rise, consumers in countries that export fuel will have more disposable income to buy more goods and services. The GDP of oil-producing and refining countries will increase. Increased fuel prices for these countries usually equate to more government spending on infrastructure, higher wages in nonauthoritarian fuel-exporting countries, and more consumer spending.

Supply chain disruptions experienced immediately post-pandemic have been mostly remedied, particularly by North American companies, resulting in more stable, predictable revenues. Fast-paced remedial conduct shoring up supply chains by North American companies avoided the global depression predicted by so many forecasters worldwide. US companies, in particular, bounced back from disrupted supply chains, creating a healthy flow of goods in and out of the US. This is solid evidence that the 2024 growth rates predicted in the Americas by the WTO are accurate predictions. Get ready! Should you have questions or wish to learn more about this topic, don’t hesitate to contact one of our leading international trade lawyers.