If one word could describe 2018, ‘turbulent’ would be a pretty good fit.

Fears of economic giants United States and China getting into a trade war kept investors and business leaders on the edge for most of the year. At the recent G20 summit, the two called a 90-day truce. But certain developments after that again raised doubts the peace would last too long.

So are there reasons to fear for global trade in 2019? Or can we leave behind the fears of 2018 as the first morning of the new year breaks? In its latest Global Trade Report, Allianz Research does some crystal-gazing for the upcoming year...

Down, but just a little bit.

Next year, global economic growth is expected to slow somewhat. Throw in lower investments because of U.S. rate hikes and decreased momentum in emerging markets and a rather sober picture emerges for trade.

In plain numbers, this means growth in the volume of goods and services traded worldwide will slow to 3.6 percent from the 3.8 percent estimated for 2018. In value, trade growth will decline to 6.3 percent from 7.2 percent.

However, there are reasons to be optimistic that the protectionism rhetoric won’t turn into a full-blown global trade war: the U.S. administration is seen turning more pragmatic, China is treading carefully in retaliating to U.S. measures, and new reforms and free trade agreements are partially making up for their spat. In fact, the latest World Bank Doing Business report shows a positive trend towards global trade in most major economies.

Never mind their blow-hot-blow-cold relationship, the U.S. and China will remain the top destinations for exporters next year. According to Allianz Research, the U.S. could import goods and service worth $193 billion more in 2019, while China could bump up its imports by $161 billion.

The Eurozone won’t exactly turn frugal.

Improving job markets and resilient investment and consumption will keep demand for imported goods and services healthy in the region. “Expect the Eurozone to increase its imports by $260 billion next year, driven by Germany,” says Ludovic Subran, the Global Head of Macroeconomic Research at Allianz.

There’s much for the Eurozone to look forward to next year. Wage growth is seen rising to 2.4 percent from 2.2 percent in 2018, while unemployment rate is expected to fall to 7.9 percent from from 8.2 percent.

Others in the top export destinations list are India and Japan. 

More services than goods actually.

2019 will see a rise of $365 billion in the value of services traded globally. The manufacturing sector deserves a special mention. It’s becoming more service-oriented, spending more on research and development, marketing and sales, customer support as well as financial services. Digitalization – that trend sweeping the world across industries – will be a major growth driver of services as the rise of the middle class in emerging markets births new consumer needs.

Another big gainer will be the electronic and electric products industry. As much as $337 billion worth of such goods more are expected to be traded next year, including telecom products, electrical apparatus and electronic components. 

Even if you set aside protectionism worries, a couple of other things that could make 2019 somewhat challenging.

First of all, trade will be a costlier affair. Higher tariffs, more time for customs clearances amid uncertainty, and tighter monetary conditions will make trade financing expensive. Add to that currency, political and payment risks and the estimated trade financing gap of $1.5 trillion is not unimaginable.

Secondly, trade diversion could create new winners and losers. Fearing supply chain disruption, companies might turn to local markets and safer trade routes. The most likely to benefit from this ‘rewiring’ are Asian supply hubs.

Last but not the least is political risk. With governments intervening more and more in trade and business, sanctions and regulatory action on important sectors could encourage protectionism.

For an in-depth analysis of trade next year, check out the Allianz Global Trade Report...