Global Trade Affected by Russia-Ukraine War

The global economy is in a rough patch as accelerated inflation, the war in Ukraine and lockdowns in China have affected international trade in March and policymakers are struggling to sustain growth. 

Data for China, Japan, South Korea and Taiwan all slow down as European consumers shrink under pressure from rising energy prices and Chinese factories slow down due to lockdowns in major cities such as Shanghai and Shenzhen.

The World Trade Organisation has said in its predictions that it expects the global economy to expand by just 2.8% in 2022, weaker than the 3% average between 2010 and 2019. It expects global trade in goods to grow 3% after adjusting for price changes. 

Export growth to the European Union and Southeast Asia has slowed along with exports to Russia. This is because Western sanctions have disrupted trade with other parts of the world. Growth in exports to the United States has also accelerated.

Russia's invasion of Ukraine and the corresponding western sanctions have caused commodity and energy prices to skyrocket. This is driving up corporate costs, disrupting supply chains and weakening demand in Europe, where consumers are hit by soaring natural gas and gasoline prices.

For Asian exporters, China's fight against Covid-19's Omicron variant will reduce orders for chips and other components used in electronics and vehicles from Chinese factories, weakening demand for China's own finished products. In this month's survey of purchasing managers from manufacturers in Taiwan, South Korea and Japan, export orders fell the most sharply in nearly two years.