04 Global trade outlook in 2020: The force weakens

06 Revenge of the trade Sith

08 Will the U.S.-China empires strike back in 2020?

10 The phantom trade menace

13 The return of trade Jedis

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Georges Dib, Economist for Latin America, Spain and Portugal

+33 (0) 1 84 11 3383

Georges.DIB@eulerhermes.com

Corentin Jousserand, Economic Research Assistant +33 (0) 184 11 5112

Corentin.JOUSSERAND@eulerhermes.com

Ludovic Subran, Chief Economist at Allianz and

Euler Hermes

+33 (0) 184 11 5399

Ludovic.SUBRAN@eulerhermes.com

Emily Chiang, Economic Research Assistant +33 (0) 184 11 4708

Emily.CHIANG@eulerhermes.com

With the kind contributions of the whole Euler Hermes and Allianz Research teams

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Sources: IHS Markit, Euler Hermes, Allianz Research

3.3% 4.0%3.0% 2.5%

5.5% 3.6% 1.5% 1.7%2.8%

2.0%

-10.3%

-1.7%

9.9%

9.0%

-1.7%

2.3%

-15%

-10%

-5%

0%

5%

10%

15%

13 14 15 16 17 18e 19f 20f

Volume Price Value

Sources: IHS markit, CPB, Euler Hermes, Allianz Research

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Sources: IHS Markit, Bloomberg, Euler Hermes, Allianz Research

-25

-20

-15

-10

-5

0

5

10

15

20

07 09 11 13 15 17 19

44

45

46

47

48

49

50

51

52

53

54

EH TMI (right scale)

Volume global Merchandise (goods) trade

growth y/y (CPB, left)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

15 16 17 18 19

7 Bellwether value (own estimate)

World Trade CPB in value

Commodity prices (CRB-BLS)

“The so-called

“phase 1” deal be-

tween the U.S. and

China, despite being

superficial, may

bring some comfort.

But renewed threats

of tariffs and a busy

political year in 2020

should bring higher

volatility, leaving no

hope for sizable im-

provement going

forward.”

Ludovic Subran, Chief Economist at

Allianz and Euler Hermes

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Sources: IHS Markit, Euler Hermes

Sources: IHS Markit, Euler Hermes

9087

35252120

1817

1615

141110101010

109

97

76

665

-80 -30 20 70 120

China

Canada

Netherlands

Germany

Belgium

United Arab Emirates

Spain

Italy

Egypt

Japan

Australia

Ukraine

Israel

2019

2020

-47

-42

-27

-24

-13

-2

0

2

6

10

11

20

22

36

37

41

62

-300 -200 -100 0 100 200 300 400 500

Electronics

Metals

Machinery&Equipment

Energy

Computers&Telecom

Automotive manufacturers

Household Equipment

Automotive suppliers

Paper

Transport Equipment

Construction

Transport Services

Textiles

Pharmaceuticals

Chemicals

Agrifood

Software & IT Serv ices

2018

2019

2020

The damaged eight

The resilient nine

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Source: Euler Hermes, Allianz Research

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1

Trade feud

(55%)

Trade war

(10%)

Global trade slows down (-2pp) US growth cut by -0.5pp US inflation durably up by +0.1 pp Europe growth cut by -0.6pp China growth cut by -0.3pp, CNY depreciation similar to 2015 (-10%)

Negligible on global trade US real GDP growth cut by -0.1pp; negligible impact on US inflation Europe’s ongoing recovery not impacted China remains on soft landing trajectory

Global trade contracts (-6pp) US growth cut by -1.7pp US inflation durably up by +0.4pp Europe growth cut by -1.9pp China growth cut by -1pp only on the back of stabilizing policies;

CNY depreciation (-20%) EM broad recession

Trade game(35%)

3.5%

4.0%

6.0%

12%

Milestone

Chinese imported products: USD50bn at 25% tariffs

& 25% import tariffs on steel imports

& 10% import tariffs on aluminum imports

Milestone

Chinese imported products:

USD50bn at 25% tariffs &

USD200bn at 10% tariffs

or

Chinese imported products: USD

50bn at 25% tariffs

&

US automotive imports:

USD200bn at 25% tariffs

Milestone

2 out of 3 events to trigger trade

war:

25% tariffs on cars imported in the

US (USD200bn)

25% tariffs on remainder of US

imports from China

Mexico tariffs progressively hiked to

25% on all imports (USD370bn)

Two-year cumulated end-of-period impactGlobal trade growth

4.0%

2.0%

0.0%

We

are

here

at end

Nov

We

are

here

at end

Nov

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Source:s: ITC, WTO, Euler Hermes, Allianz Research

-4.0

-1.8-0.8 -0.4 -0.2 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 0.0

-8.5

-3.8

-1.6-0.9 -0.5 -0.4 -0.3 -0.2 -0.2 -0.2 -0.1 -0.1 -0.1

-14

-12

-10

-8

-6

-4

-2

0

EU

Ger

man

y

Uni

ted

King

dom

Ital

y

Slo

vakia

Swe

den

Fin

land

Aus

tria

Spa

in

Hun

gary

Bel

gium

Net

herla

nds

Fra

nce

Additional losses if tariffs are hiked to 25%

Export losses i tariffs are hiked to 10%

9

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The size of the bubble is the country’s total exports in 2018 in USD Sources: ITC, IHS Markit, Euler Hermes

South Korea

Taiwan

Japan

Australia

Germany

Brazil

Malaysia

Russian Federation

Saudi Arabia

Viet Nam

France

CanadaIndonesia

Singapore

Switzerland

United Kingdom

United States of America

-30%

-20%

-10%

0%

10%

20%

30%

0% 2% 4% 6% 8% 10% 12%

Chan

ge in

mar

ket

shar

e in

Chi

na's

impo

rts b

etw

een

2019

and

201

8

2018 market share in total China. imports

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The size of the bubble is the country’s total exports in 2018 in USD Sources: ITC, IHS Markit, Euler Hermes

Sources: ITC, Euler Hermes

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-

China

Mexico

Canada

Japan

Germany

South KoreaIndia

Italy

Taiwan

France

Malaysia

Thailand BrazilSingapore

Netherlands

Israel

-26%

-16%

-6%

4%

14%

24%

34%

-5% 0% 5% 10% 15% 20% 25%

Chan

ge in

mar

ket

shar

e in

U.S

. im

ports

bet

wee

n 20

19 a

nd 2

018

2018 market share in total U.S. imports

90

95

100

105

110

115

120

125

130

Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19

Exports from Japan to the U.S.

Imports of Japan from China

Imports of U.S. from China

Implementation of List 3

tariffs by the U.S.

Georges Dib, Economist for

Latin America, Spain and Portugal

”“Phantom trade avoids tariffs and artificially

inflates trade figures. Our preliminary analysis

with not more than a year and a half of data

shows that Japan and Taiwan are used as re-

bound markets for machinery products”

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Figure 11 Regional trade agreements entering into force

Sources: WTO, Euler Hermes

0

50

100

150

200

250

300

350

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Number of Regional Trade Agreements (RTAs) currently in force, by

year of entry into force (rhs)

Yearly growth of RTAs (lhs)

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Sources: IHS, Bloomberg, WTO, GTA, Euler Hermes, Allianz Research

Sources: IHS, Bloomberg, WTO, Euler Hermes

CountryTrade openness (%

GDP)

Total # of

protectionist measures

since 2008

Average tariffGoods trade

balance % GDP

Trade deficit

concentration

index

REER change

since 12/2017

Argentina 38% 319 14% 0% 67% -33%

Australia 44% 174 3% 1% 50% -7%

Brazil 24% 302 13% 1% 61% -10%

Canada 67% 199 4% 0% 52% -1%

China 53% 256 10% 32% 40% -1%

France 59% 262 5% -2% 61% -1%

Germany 113% 390 5% 4% 82% -1%

India 63% 566 17% 0% 50% -3%

Indonesia 45% 219 8% 0% 75% 2%

Italy 59% 294 5% 1% 61% -2%

Japan 40% 209 4% 0% 55% 8%

Mexico 64% 103 7% 1% 56% 3%

Russia 43% 423 7% 4% 61% -1%

Saudi Arabia 73% 44 5% 6% 60% 4%

South Africa 59% 129 8% 0% 59% -2%

South Korea 139% 75 14% 0% 46% -6%

Turkey 49% 167 11% -2% 51% -9%

UK 49% 357 5% -7% 43% -2%

US 46% 790 3% -3% 57% 6%

Trade capability Trade irritability

China

Germany

Canada

Brazil

India

France

Indonesia

Italy

Japan

Mexico

Russia

Saudi Arabia

Turkey

US

South Korea

AustraliaSouth Africa

UK

0

100

200

300

400

500

600

700

800

900

-15% -10% -5% 0% 5% 10%

Tota

l pro

tect

ioni

st m

easu

res

Change in REER in 2019

Irritable and equipped

Equipped but not irritable

Not equipped and not irritable

Irritable but not equipped

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Impacts of the shift to a more sustainable model of trade on trade flows and companies

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Sources: WTO, IMO, Maersk, CMA CGM, EU Commission,, the OECD

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