The COVID-19 pandemic delivered a knock-out punch to the global trading system. Most exports from North America stopped or were severely disrupted. The good news for businesses involved in international trade: the worst is over! While global trade, as with most North American exports, contracted sharply in the first half of 2020, it has rebounded in Q3. Forecasts through 2023 call for U.S. trade with China to contract -15%, but enjoy continued growth with Europe, SE Asia (+7% growth through 2025), Latin America and the Middle East (+10% growth through 2025).
On a macro-level, many countries simply do not produce the food and agriculture its citizens require or demand. Despite severe recession and economic hardship in many countries, consumers will continue buying the small “luxuries” they enjoy, which includes imported food and beverages. Finally, businesses will still need to trade with other nations to achieve growth as domestic economies are not sustainable on their own. More countries will forge bi-lateral and regional free trade agreements in order for their manufacturers to access markets and maintain competitiveness.
Overall, we see continued sanguine prospects for global trade, particularly in processed and organic food and beverages, allergen-free and plant-based food and beverages, nutritional supplements, baked and frozen foods, pet food, ingredients and agricultural products. Health, wellness and immunity-boosting foods, beverages and supplements are rising dramatically worldwide. Retail and e-commerce sales are also growing rapidly in most foreign markets due to consumers staying at home. Ingredient costs may also decrease due to lower worldwide demand, enhancing profits of North American manufacturers.
The downside risks of increasing global trade and exports are additional waves of COVID-19 or other virus mutations, weaker consumer demand and economic growth, free trade agreements which exclude the U.S. and Canada, and further import restrictions for North American products. While we do not have a crystal ball to predict the future, we believe the global trade glass is half full. Now is an opportune time for North American companies to assess pro-actively the markets and customers that will drive future growth and secure a competitive advantage in a post-COVID world.