Allianz: Coronavirus is Worse for Commerce Than U.S.-China Trade War

In a research note published Thursday, an economis at leading European insurer Allianz SE predicted that the impact of the novel coronavirus on global commerce will be greater than that from the U.S.-China trade war. 

"We estimate that losses of trade in goods and services could amount to $320 billion per quarter of business disruption. Each quarter of Covid-19 related trade losses in 2020 is thus comparable to the annual impact of the U.S.-China trade dispute on world tariffs in 2019," Allianz chief economist Ludovic Subran said in a note co-authored with two colleagues.

Early trade indicators suggest that global trade volume will fall by 2.5 percent in the first quarter and one percent in the second quarter, the team estimated - a rare recession after years of steady growth. 

For trade in goods, the team predicts that business will gradually pick up pace in March and April, returning to normal by the end of the second quarter. "[Global] export losses should amount to a total of $161 billion as demand from China and Europe will remain significantly impacted by the end of April," Subran wrote.

In services, Allianz expects a significant fall in tourism to and from Italy, China and within Europe, along with a slowdown in transportation services. The return to normalcy in these two sectors is expected to be very gradual, and Subran forecasts global export losses of $125 billion on the tourism side and $33 billion for transport services.

As the shipping industry knows well, the impact will be serious for maritime operators. "There have been 49 percent fewer sailings by container ships from China in the last four weeks, according to the European Commission. The forecasted drop of 20-25 percent in global shipping industry throughput will have a corresponding impact on the port terminal industry," the team noted. 

On the upside, if the recovery is as strong in the second half as expected, the year is still on track to end with annual trade volume growth of 0.4 percent, the team forecast.