WTO tempers hopes for a V-shaped rebound, sees L-shape possible

Global trade is starting to crawl back after collapsing to a record low in June, the World Trade Organization said, but the outlook remains too murky to conclude whether a sharp rebound will happening or the recovery will muddle along for months.

“Projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic,” the WTO said in a report Wednesday. “As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect.”

The Geneva-based organization’s latest Goods Trade Barometer fell to 84.5 in June, compared with a level of 87.6 in May and 95.5 in February. Readings of 100 indicate growth over the next quarter in line with medium-term trends, while those higher or lower than 100 point to growth above or below the recent trend.

The growth of international commerce had slowed since the end of 2018 before turning negative in the third quarter of 2019 as the U.S. and China fought a trade war. Then the pandemic pushed global trade into its steepest collapse in modern history in the second quarter.

The WTO previously projected that trade flows could fall by by as much as 30% and potentially exceed the losses seen during the Great Depression. The latest report said that scenario now seems less likely as trade flows remain on trend for a 18.5% decline in the second quarter of 2020 compared with the year-earlier period.