Is The World Trade Crisis Nearing Its End ?

Credits: Alex Duffy/Unsplash

Between the end of 2022 and the beginning of 2023, the great supply chain crisis, which had caused enormous problems throughout the world trade system and made many goods and raw materials unobtainable, eased considerably. 

Good News For Inflation

This is good news for inflation, of which the trade crisis had been one of the factors, but we must bear in mind that the crisis is not entirely over: in many sectors there are still shortages of raw materials, as we are seeing in these weeks in Italy with over-the-counter medicines. Furthermore, things could get complicated again in the coming months, due to the serious wave of Covid that is hitting China in recent weeks. 

The crisis of the global supply chain, i.e. of that complex and interconnected system of transport and supplies on which trade and the economy of the world are based, had begun in the second half of 2021 and had been caused by various factors: the crisis caused by the pandemic, a decline in industrial production, labor shortages etc. 

The result had been a blockade of the ports, an exceptional increase in the costs of maritime shipments, major slowdowns in the procurement of raw materials and numerous goods. Rising costs and the scarcity of goods, in the face of very strong demand, had driven up prices, and the crisis in world trade had become one of the main factors in the rise in inflation over the last year and half.

Logistics and Transportation

Most of the improvements have come from the logistics and transportation side. Many ports that were congested for months early last year, especially in the United States and China, are now operating normally. Shipments of goods, which until a few months ago encountered enormous difficulties, have returned to levels of efficiency similar to the period before the crisis. 

These improvements have occurred both because some problems (such as the shortage of containers) have been resolved, and because demand has decreased: once the lockdowns ended, people stayed at home less and started spending their money no longer on goods materials but in services, such as bars, restaurants, cinemas, gym classes and so on. 

The situation is more complex with regard to shortages of goods and raw materials, which are more difficult to solve. In many sectors, such as the chemical, pharmaceutical and automotive sectors, there are still blockages and slowdowns. This is because often for companies interested in increasing production it means implementing complex and long-lasting reforms, such as profoundly overhauling their production processes, changing the supply system and so on.

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Source: Ruetir