Bank of Korea: "Global Trade Recovers Centered on Goods Trade... US Biden Reduces Trade Uncertainty"

Bank of Korea Overseas Economic Focus

[Asia Economy Reporter Kim Eunbyeol] Global trade, which sharply declined due to the novel coronavirus disease (COVID-19) pandemic, is expected to recover mainly in goods trade. In particular, the inauguration of the Joe Biden administration in the United States is widely anticipated to reduce uncertainties in the global trade environment. However, the growth trend in global trade volume is expected to slow somewhat compared to the pre-crisis period.

On the 6th, the Bank of Korea stated in its 'Overseas Economic Focus' report, "With the inauguration of the Biden administration, the global trade environment is expected to stabilize somewhat, and China's steady growth along with improved global investment sentiment is likely to contribute to the recovery of goods trade."

First, the Bank of Korea expects the Biden administration to restore relations with allied countries, reinstate multilateral trade systems, and reduce uncertainties in the trade environment. It also noted that since the Biden administration views trade as part of diplomacy, the threat of automobile tariffs on the European Union (EU) is expected to be halted.

The solid recovery of the Chinese economy was also cited as a positive factor, and investment, which significantly affects goods trade, is expected to recover gradually. However, strict immigration controls to prevent the spread of infectious diseases are expected to prolong the contraction of human exchanges. The International Air Transport Association (IATA) forecasts that global overseas travel numbers will only return to pre-COVID-19 levels in 2023.

On the downside, the acceleration of country-centric global value chains (GVCs) triggered by the COVID-19 pandemic and China's strengthening of a domestic demand-driven growth strategy are expected to constrain trade expansion.

The Bank of Korea stated, "Although global trade contracted to a level comparable to the global financial crisis this year, the degree of contraction was not as severe considering the unprecedented halt in economic activities caused by the pandemic," and added, "Going forward, despite constraints on service trade, global trade is expected to continue recovering mainly in goods trade."

This content was produced with the assistance of AI translation services.