According to calculations by Crédito y Caución, the global escalation of the trade war could represent approximately $1,5 trillion in trade losses by the end of 2020.
A second effect is that uncertainty about trade policy is driving an increase in the number of insolvencies in advanced markets, after almost a decade of considerable annual improvements.
It is estimated that the application of increasingly stringent protectionist measures, especially in trade between the United States and China, will have negative effects on other economies, particularly Japan, Taiwan, Vietnam, and South Korea, the main trading partners of the Asian giant, where exports to China have already fallen between 10% and 20%.
Part of the trade from these economies is shifting toward the United States. Markets like Vietnam have seen a 40% increase in their exports to North America, but others, like Japan, have more difficulty diverting their trade, as their labor costs are higher and their export sector is geared toward value-added products.
“ If trade policies remain uncertain and trade relations strained, insolvencies will increase. We expect trade growth to slow to 2% this year, before recovering slightly in 2020, and bankruptcies to increase by 2% this year, ” comments Andreas Tesch, Chief Market Officer at Atradius. “ In this context, the most significant risk is that companies will become increasingly vulnerable, especially with regard to corporate debt. For this reason, it is of utmost importance that suppliers selling on credit carry out an accurate assessment of their buyers' solvency, using the most up-to-date credit information to avoid serious cash flow problems that could harm their business. Trade credit insurance and its information services remain the most effective instrument to ensure the survival of companies should buyers default .”
