Some thoughts on ecology, evolution and economics

What’s shaking in world trade?

A couple of years ago, I offered a synopsis of world trade patterns on the basis of the Economist’s Pocket World in Figures.  Here is an update of that post for 2018 with a bit of a forecast of how the trade deals (or lack thereof) we keep hearing about might shake things up in the future.

Figure 1: Patterns in world trade. Major export flows (>$250 B) in red. Others (>$50 B) in blue. See here for assumptions.

What has changed?

The main change from the 2015 Pocket World in Figures is a 6% decline in exports, which is surprising given a 3% smaller world economy over the same period.  One change since three years ago is a significant increase in UK exports to the US.  Last time, only Germany was showing exports of more than $50 B crossing the Atlantic, creating an image of two separate trading blocks, one in Europe and the other clustered around the Pacific.  Not much else has changed, except for some of the interrelationships within Europe.  Like last time, the four major trade flows (greater than $250 B) all involve the US, with exports to Canada being the only one of those moving outward from the world’s  (still) biggest economy. Exports from China had just replaced those from Canada as the world’s largest export stream according to the 2015 edition.  Now, China’s exports to the US are much larger than Canada’s.

What can we expect?

What do we have to look forward to in the current anti-trade environment?  Table 1 lists a couple of the possible outcomes.  Unsurprisingly, with three of the major trade flows, the cancellation of NAFTA would have the biggest effect on the world economy.  This would have secondary effects on countries outside of North America.  A trade war between China and the US could be worse but here I have pegged it at a $60B loss – about as much as has been gained in the last three years.  The impacts of Brexit would only be half as bad but proportionately quite important for the British.  On the positive side, Canada’s trade arrangement with the European Union (CETA) would see a modest boost in world trade.  The Trans-Pacific Partnership (now the CPTPP) is much smaller than it would have been with US involvement, but still represents a sizeable increase in economic activity.  Interestingly, should all of these deals and calamities come to pass, our diagram will not look very different.  Such destabilization might hasten the day when Russia, India and Brazil play proportionately larger roles in world trade but the major trade flows will look very similar for the next decade.


 Table 1: Size and percent change of largest trade relationship arising from potential changes in world trade.
Deal/ Issue Countries Total value
% change in largest trade flow
CPTPP Japan, Canada, Mexico, Australia &  7 others    $37 B +15%
CETA Canada – EU    $14 B  +12%
Brexit UK – EU  -$30 B -8%
China – US trade war China, US  -$60 B -14%
NAFTA exit US, Canada, Mexico  -$80 B  -7%


The two cardinal rules of trade are likely to hold up despite protectionist politicians and re-examination of assumptions in a post-carbon economy.  We will continue to trade with 1) our neighbours and 2) the world’s largest economies.