McKinsey’s Global Economics Intelligence executive summary, January 2024) includes analysis of the changing geometry of global goods trade using four measures, each of which has its own limitations: trade intensity, geographic distance, import concentration, and a new measure of “geopolitical distance.”
TALKING POINTS:
–The global economy was more resilient than anticipated in 2023, but uncertainty about growth persists in 2024…
–The picture is messy out there, with data pointing to an uncertain global economic outlook this year…it brings further ambiguity…
–Trade patterns are reconfiguring. More shifts are likely and stakeholders need to be aware of the potential trade-offs of different paths ahead.
Factors: subdued manufacturing environment, a decline in global trade flows, renewed uncertainties about supply chains (especially concerns over shipping via both the Red Sea and the Panama Canal), and lingering inflation…
–Russia and China stand out with rebounding…
–US sees upbeat consumer sentiment…
–Currently, world trade is largely being driven by imports in emerging economies…
–It’s an era of global sanctions, geopolitical instability, and carbon reduction as economies decouple, derisk, and engage in “friendshoring”…
–The number of new global trade restrictions each year has been steadily increasing, from about 650 new restrictions in 2017 to more than 3,000 in 2023.6
–The future of global trade will involve trade-offs—reducing geopolitical distance comes with increasing trade concentration, and vice versa…
The in-depth analysis explores two types of reconfiguration: in the first, trade between economies shifts to more geopolitically aligned partners, such that average trade concentration increases and economic growth suffers; in the second scenario, trade relationships diversify, leading the geopolitical distance of trade to increase…
Read the report here: https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/global-economics-intelligence-executive-summary-january-2024
Read the in-depth analysis here: Geopolitics and the geometry of global trade, to explore it in depth.
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