On the whole, the global pandemic has already cost the global economy trillions—and that toll still mounts.
It also is proving a learning moment for most companies as they identify new opportunities and challenges.
Like many business thought leaders, management consulting firms, especially the biggest ones, are tending to predict that the global economy has not just changed for the moment but forever. That change, they argue, has led to reciprocal changes by companies operations, cultures, and strategies. Trends in trade look to be particularly impacted.
New Trade Trends
Along with Bain & Company and McKinsey & Company, BCG takes rank as one of the top three management firms in the world (they are second in revenue after McKinsey & Company), and the companies that pay them seek insight beyond what is immediately visible as it relates to their specific organizations, their respective industry sectors, and the global economy as a whole.
So what’s in store for global trade post-pandemic? BCG addresses this question in their new study, “Achieving Supply Chain Resilience in a Volatile World,” released in July.
The pandemic’s impact on trade and the global economy have, obviously, been profound. Global trade, BCG predicts, is on track to return to its pre-pandemic 2019 levels by 2022-23 following an eight percent reduction in such trade since the pandemic’s onset.
Inflationary pressures are also proving a present tense reality—and one likely to endure for the time being. In the United States, inflation has historically been well contained since the late 20th century, But partly stemming from unprecedented federal spending in the face of the pandemic, it is now running at roughly five percent.
Environmentally friendly policies
Globally, this inflationary trend is also being fueled by ongoing and anticipated environmentally-friendly policies that most companies have adopted or expect to soon adopt. Roughly 80 percent of companies, according to a survey of 1705 executives and operations managers, say their companies seek to ultimately reach carbon-neutral operations and 60 percent say they anticipate reaching this by 2030 or earlier. These ambitious objectives will not come without costs, and those costs almost surely will passed on to consumers.
U.S. – China decreasing trade
Trade between the U.S. and China, the world’s two largest economies, could prove the most profound post-pandemic change. BCG sees substantial reductions in this trade, likely a roughly 3.7 percent downturn annually through 2030, which will reflect a sizable $114 billion reduction in the overall U.S.-China trade relationship by that year.
Southern hemispheric growing trade
But while trade between the two largest economies is expected to shrink, global trade between those two economic giants and the rest of the world and trade between other economies will grow at roughly 2.7 percent overall annually, BCG predicts. Trade in the southern hemispheric economies of Africa, Australia, the ASEAN nations of South Asia, and the Mercosur region of Latin America show signs of growing most substantially.
The pandemic’s impact on sectors is expected to be both profound and varying, BCG reports. In healthcare, for instance, some developed economies, especially India and the U.S., seem committed to reducing foreign dependence and to enacting policies and other measures to enhance their self-sufficiency in this sector.
In technology, the world also faces at least a short-term shortage of semiconductors, which could last several years as a result of production disruptions and other factors, BCG reports.