• Over the Next 10 Years, World Trade in Goods Expected to Trail GDP Growth, Reversing a 20-Year Trend, According to a New Analysis by BCG

• World Trade Forecast to Grow at 2.8% per Year through 2032, Compared with an Estimated 3.1% Growth Rate for Global GDP in the Same Period

• Five Emerging Global Trade Dynamics Will Shape the Coming Decade

• US-China Trade Set to Drop, with 2032 Trade Value Forecast to Fall by $197 Billion from Its 2022 Level, While Growth in EU-China Trade Will Slow

BOSTON, Jan. 8, 2024 /PRNewswire/ — As the global economy adjusts to persistent economic and geopolitical pressures and disruptions, the familiar routes that defined the world trade map are being redrawn and regional trade lanes are playing a greater role in world trade.

The changing trade picture shows that overall global trade is growing at a slower rate than the world economy, a fundamental shift away from the trend of trade-led globalism that the world enjoyed in most of the years since the end of the Cold War. World trade in goods is forecast to grow at 2.8% per year, on average, through 2032, compared with an estimated 3.1% growth rate for global GDP in the same period, according to a new analysis by Boston Consulting Group (BCG).

The Emergence of New Trade Patterns

The emergence and growing prominence of regional trade corridors is impacting traditionally significant trade routes like China-US and China-EU.

“Global trade is shifting and the once-familiar map is being redrawn,” said Nikolaus Lang, managing director and senior partner, global leader of BCG’s Global Advantage practice, and a coauthor of the report. “As supply chains are rebalanced and neighboring countries solidify their regional trade relationships, we expect to see lasting changes in flows of goods around the world.”

Five Emerging Global Trade Dynamics

The research highlights five emerging global trade dynamics that will shape the world in the coming decade:

• China Trade Dynamics

  Persistent trade tensions and increased “managed trade” between China and the West are causing West-China trade to decelerate. US-China trade is set to drop significantly, with a forecasted value decline of $197 billion by 2032 from its 2022 level. China’s trade with the EU will continue to grow, but at a slower rate than the global average.

• Stronghold North America

  The United States, Canada, and Mexico are projected to benefit from the US Mexico Canada Agreement (USMCA), with US trade with its neighbors expected to grow by $466 billion in the next decade.

• ASEAN Trade Growth

  Southeast Asian nations, particularly the ASEAN countries, will experience significant trade growth as they emerge as key destinations for companies diversifying their manufacturing and sourcing away from China. Cumulative ASEAN trade is forecasted to grow by $1.2 trillion in the next ten years.

• India Ignition

  India’s low-cost structure, skilled workforce, and improving logistics make it a major domestic market and a preferred manufacturing destination as companies look for alternatives to China. India is expected to achieve average annual trade growth of 6.3%, more than twice the global average.

• Russian Trade Divergence

  Russia’s trade is shifting towards other BRICs countries (Brazil, China, India, and South Africa). While Russia’s trade with China and India is projected to grow by $134 billion and $26 billion, respectively, by 2032, its trade with the EU will decrease by $222 billion.

“Unit economics is one of the leading contributors to these shifts, but geopolitics are also a clear catalyst,” said Marc Gilbert, managing director and senior partner at BCG and a coauthor of the report. “In a year with many crucial global elections ahead and nearly half of the world’s population voting, we expect to see a continued industrial policy focus on national economic security, job creation, and green energy. One consequence will be the reinforcing of regional trade groupings, especially in North America, the European Union, and ASEAN.”

China’s Changing Role in Global Trade

China, currently the world’s leading exporter of manufactured goods, is experiencing a decline in cost-competitiveness and a slowing domestic economy. As non-Chinese firms reconsider their supply chains, trade that previously flowed between China and the West will now be redirected elsewhere. ASEAN countries and India are anticipated to benefit from this shift as manufacturing moves to these economies, reducing global supply chain risks and accessing new markets. Trade between ASEAN and China is expected to grow by an impressive $616 billion in the coming decade, with increased trade also foreseen between ASEAN and the US and Japan, exceeding $200 billion.

“These changes in trade patterns are reshaping the global economy. Companies need to be thoughtful and decisive or risk being caught off guard by uncontrollable factors,” said Michael McAdoo, BCG partner and director for global trade and investment, and a coauthor of the report. “Those who are proactive are already investing in strengthening supply chain resilience, responding to volatility, and developing appropriate risk and cybersecurity capabilities.”

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SOURCE Boston Consulting Group (BCG)