Pandemic to accelerate shift in global trade relations

Moody’s Investors Service on Tuesday said COVID-19 will create a trend toward a more fragmented and protectionist global economy, with restrictions on trade, investment and technology transfers. It further said that the supply chain shifts will occur in a multi-year process, particularly as China will retain a number of advantages over other economies.

“Asian countries ex-China will stand to benefit from diversification away from China provided that these countries have sound economic fundamentals, reliable infrastructure, sufficient human capital stock, and low geopolitical and supply security risk,” it noted further. Moody’s also warned that localization of production or reshoring that moves productive capacity out of the region to the US or the European Union will have negative effects for Asian producers.

The agency further predicted that as global trade system becomes more regionally focused, each major region – Asia, Europe and the US – will likely have its own suppliers for strategically important products. It added that ensuring supply security through enhanced supply chain robustness will become a key focus of governments and companies.