by Calculated Risk on 12/10/2008 11:40:00 AM

From Brad Setser: Global trade is shrinking, fast

China’s November trade data (a 2.2% year over year fall in exports; a 17.9% year over year fall in imports — see Andrew Batson of the Wall Street Journal) suggests that global trade is contracting quite rapidly. And since trade accounts for a rising share of global activity, it suggests that the global economy has stalled — and perhaps is contracting.

The fall in China’s exports suggests global demand is falling. And the fall in China’s imports on first blush seems larger than can be explained just by the fall in demand for imported components for China’s exports and sliding commodity prices: it suggests that Chinese domestic demand is quite weak ...

The November data from Korea and Taiwan tells a similar story. All experienced far larger falls in year over year falls in their exports than China did.

But China may still run a strong surplus, because the decline in imports (because of falling commodity prices) will more than offset the decline in exports:

[R]ight now there isn’t any much reason to think that China’s trade surplus will shrink in 2009. Exports will fall. But so will imports. And the fall in commodity prices implies that the terms of trade have shifted in China’s favor.

See Brad's post for more. The recession has gone global.