U.S. goods leaving Miami. (Photo by Joe Raedle/Getty Images)
United States exports will grow at a slow pace in 2022, with improvement in 2023. Key factors will be the Covid-19 pandemic, how our largest trading partners fare economically, and the path for the dollar. No boom is in sight, but neither is a bust.
Total international trade fell sharply in the pandemic, with most countries’ exports and imports both declining. Trade has rebounded but has not yet increased to the prior trend line. Transportation and labor shortages may lead to slower growth than underlying economics would otherwise dictate.
Global trade has recovered from the pandemic recession.
The Covid pandemic brings great uncertainty to the forecast. The rise of the Delta variant is slowing economic activity in some countries, but not the most advanced nations, which have high vaccination rates. Although breakthrough cases (among people who had been vaccinated) are occurring, they average much milder symptoms and markedly less fatalities. Economic impacts are thus much milder. The assumption in this forecast is that the pandemic will decline around the world, though at varying rates. Covid will become endemic, and thus will be an economic problem for years to come, but with a much milder impact than we have seen so far. That means that U.S. exports should look better soon.
The global economy has regained much of its lost ground and should exceed pre-pandemic levels by the end of 2020. Brighter days are ahead in 2022 and 2023 according to the consensus tabulation by FocusEconomics. They tally up economic forecasters on the ground in different countries and regions to derive a world consensus economic forecast. This is probably the best methodology for big-picture economic predictions as it incorporates the knowledge of specialists in diverse countries.
Commodity prices also provide a good gauge of predicted future growth. Prices stopped their rise, indicating global expectations for economic expansion have leveled off. Oil prices match the general commodities trend.
Global GDP will expand in the coming years.
America’s closest neighbors also buy the largest portion of our exports, Canada at 18% and Mexico at 15%. Neither are very strong right now. Canada had a marked slowing of economic growth in the first half of 2021, due mostly to Covid restrictions. With progress against the pandemic and recovery in the U.S., the country should rebound strongly.
Mexico gained much ground this year but did not fully recover. Sluggishness will continue in 2022, then growth will accelerate. Covid has come down sharply from its summer peak, but Mexico is slower than the U.S. in vaccinations, with 28 percent fully vaccinated and 47% having at least one dose. Remittances from Mexicans working in the U.S. have increased with the American economy, but the parts and materials shortages that plague the world have prevented strong export growth.
China ranks third nationally for exports from the U.S. (but first for Oregon and Washington). Their economic growth is slowing even more than in past years. Their Covid policy aims for zero cases, which will have severe consequences. Most westerners have resigned themselves to the idea that the disease is in the public and cannot be totally eradicated, but China’s path will slow commerce by stopping movement within the country as well as to and from the country. In addition, the government’s regulatory actions against private businesses have slowed activity both directly and through uncertainty about the future. China will continue to expand, but at a much slower pace than in years past.
European countries buy 20% of U.S. exports, and they are the brightest star on exporters’ horizon. Europe’s summer wave of Covid cases has been milder than America’s. Vaccination rates are high, making the case load lighter and the death rate very low. As Covid restrictions are easing and stimulative government policies continue, spending is increasing and Europe as a whole is on the mend.
The other key factor for U.S. exports is the foreign exchange rate. That has leveled off and so will be neutral for international trade. Federal Reserve tapering of its bond-buying (likely to begin late this year) may lead to dollar appreciation, but the time lags involved in international trade would prevent significant changes in export sales until 2023.
All told, U.S. exports will grow at a light-to-moderate pace in 2022 and faster in 2023 as Covid’s economic impacts diminish.
