DHL global trade report shows weakening US-China ties

A DHL global-trade report shows that the USA and China are “decoupling” manufacturing and trade links, but that globalisation generally is proving resilient in the face of supply chain shocks, such as the war in Ukraine. 

The DHL Global Connectedness Index 2022 is an in-depth report on the state of globalisation and its prospects. Co-published by New York University’s Stern School of Business, it is built on data from 171 countries and territories, and shows how trade, people, capital, and information move around the world.

The Index reports that the US and China are “decoupling in many fields”. 

US-China links loosening, but still extensive

Looking at 11 types of trade, capital, information, and people flows – such as merchandise exports, M&A transactions and scientific research collaboration – the share of US flows with China declined for 8 out of 11 types since 2016.” 

It also shows that, in the same period, the share of China’s flows with the US decreased for 7 out of 10 categories, several of these were large declines. 

However, putting this loosening of ties into context, the Index points out that US-Sino “are linked by far greater flows than any other two countries that do not share a border”. 

Further, it says, data suggests that decoupling between the two countries has “not led to a broader fragmentation of global flows between rival blocs of countries”.

The Index also suggests predictions of a shift from globalisation to regionalisation have not as yet come to fruition. 

Trade flows lengthened during pandemic - DHL Index

It shows that the average distance traversed by trade, capital, information, and people has increased over the past two decades, and that trade flows lengthened during the Covid-19 pandemic. 

The only category that shows a shift toward regionalisation is people flows, which it says is due to “the dramatic change in travel patterns during the pandemic”.

After a slight decline in 2020, the Index rose back to above pre-pandemic levels in 2021. The currently available data points to a further increase in 2022, despite slower growth in some flows. 

International trade in goods was 10% above pre-pandemic levels in mid-2022. International travel remained 37% below 2019 levels in 2022, but doubled compared to 2021.

DHL Express CEO John Pearson said: "The data debunks the perception of globalisation going into reverse gear. Globalisation is not just a buzzword, it’s a powerful force that has transformed our world for the better. 

“By breaking down barriers, opening up markets and creating opportunities, it has enabled individuals, businesses and entire nations to flourish and thrive like never before. 

“As we continue to embrace globalisation, we can build a brighter future that benefits us all, creating a world that is more interconnected, more prosperous and more peaceful than ever before.”

Steven Altman – Director of the DHL Initiative on Globalisation at NYU Stern’s Center for the Future of Management – says the Index suggests that “it remains an open question whether trade patterns will become significantly more regionalised in the future”.

He adds: “Many companies and governments are focused on nearshoring to regionalise supply chains, and there are substantial business benefits that can come from regionalisation. 

“On the other hand, more than half of all trade already happens within regions, and the benefits of long-distance trade are still important, especially as inflation remains high, economic growth has slowed, and container shipping rates have come back down.”

In the country ranking of the Index, the Netherlands was again the most globally connected country. Singapore ranked second and first respectively in terms of the size of international flows relative to domestic flows. The UK, meanwhile, has the most globally distributed flows.