Exports from the United States will increase at a slow pace in 2022, with improvement in 2023. Key factors will be the Covid-19 pandemic, the economic situation of our major trading partners and the trajectory of the dollar. No boom is in sight, but neither is a bust.
Total international trade fell sharply during the pandemic, as exports and imports from most countries fell. The trade rebounded but has not yet risen to the previous trendline. Transportation and labor shortages can lead to slower growth than the underlying economy would dictate otherwise.
The Covid pandemic brings great uncertainty to the forecasts. The rise of the Delta variant is slowing economic activity in some countries, but not in the more advanced countries, which have high vaccination rates. Although cases of rupture (among people who had been vaccinated) do occur, on average they have much milder symptoms and significantly fewer deaths. The economic impacts are therefore much more moderate. The assumption for this forecast is that the pandemic will decrease globally, but at varying rates. Covid will become endemic and therefore be an economic problem for years to come, but with a much more moderate impact than what we have seen so far. This means that US exports are expected to improve soon.
The global economy has regained much of the lost ground and is expected to surpass pre-pandemic levels by the end of 2020. Better days are ahead in 2022 and 2023 according to the consensus tabulation of FocusEconomy. They bring together economic forecasters on the ground in different countries and regions to derive a consensus global economic forecast. This is probably the best methodology for global economic forecasting, as it incorporates the knowledge of specialists from various countries.
Commodity prices also provide a good indicator of expected future growth. Prices have stopped rising, indicating that global expectations for economic expansion have stabilized. Oil prices correspond to the general trend for commodities.
America’s closest neighbors also buy most of our exports, Canada at 18% and Mexico at 15%. Neither of them are very strong at the moment. Canada experienced a marked slowdown in economic growth in the first half of 2021, mainly due to Covid restrictions. With the progress against the pandemic and the recovery in the United States, the country is expected to rebound strongly.
Mexico have gained a lot of ground this year but haven’t fully recovered. The sluggishness will continue in 2022, then growth will accelerate. Covid has fallen sharply from its summer peak, but Mexico is slower than the United States on vaccination, with 28% fully vaccinated and 47% having at least one dose. Remittances from Mexicans working in the United States have grown along with the U.S. economy, but global parts and materials shortages have prevented strong export growth.
China ranks third nationally for US exports (but first for Oregon and Washington). Their economic growth is slowing even more than in previous years. Their Covid policy targets zero cases, which will have serious consequences. Most Westerners have resigned themselves to the idea that the disease is public and cannot be totally eradicated, but China’s path will slow trade by stopping travel within the country as well as to and from from the country. In addition, government regulatory measures against private companies have slowed activity both directly and out of uncertainty about the future. China will continue to develop, but at a much slower pace than in the past.
European countries buy 20% of US exports, and they are the brightest star on the exporter’s horizon. The summer wave of Covid cases in Europe has been milder than that in the United States. Vaccination rates are high, reducing the number of cases and the death rate very low. As Covid restrictions ease and stimulating government policies continue, spending is rising and Europe as a whole is on the mend.
The other key factor in US exports is the exchange rate. This has stabilized and will therefore be neutral for international trade. The gradual reduction in its bond purchases by the Federal Reserve (which will likely begin at the end of this year) could cause the dollar to appreciate, but the time lags involved in international trade would prevent significant changes in sales to the United States. export until 2023.
In total, U.S. exports will increase at a slight to moderate pace in 2022 and faster in 2023 as the economic impacts of Covid decline.