Daily Brief: The World Trade Organization Thinks 2023 Could Be A Rocky Road

Daily Brief: The World Trade Organization Thinks 2023 Could Be A Rocky Road

over 1 year ago3 mins

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The World Trade Organization (WTO) warned on Wednesday that global trade growth could slow down majorly next year.

What does this mean?

One thing’s been clear for a few months – there’s a bumpy economic road ahead. And now that the WTO’s suggesting we’re approaching a straight-up dirt trail rather than a highway, you might want to buckle up extra tight. The path looks rough: food and energy prices loom large, and towering interest rates present many countries with the prospect of a full-blown recession – all of which is likely to weaken import demand. On top of that, Covid restrictions in China – the “world’s factory” – have torn a hole in production and demand. That could be why the WTO sees global trade growing just 1% next year – far below its previous forecast of 3.4% and lightyears from 2021’s 9.7% growth. The organization even warned that trade could shrink if the war in Ukraine worsens.

New export orders down
Source: The Wall Street Journal

Why should I care?

The bigger picture: Keep it spread out, stupid.

Right now, the global supply chain’s like a skyscraper whose center of gravity is way up on the fiftieth floor: the gentlest wind can set us a-trembling, and earthquake-level events (like pandemics and wars) shake us to the core. To achieve stability and counterbalance any localized disruptions, the world needs more diverse and less concentrated bases of supply. The EV industry’s got the right idea: this year Tesla announced plans to source nickel from Canada to reduce its reliance on China.

Zooming out: A bird in the hand?

Speaking of Tesla, the firm’s CEO Elon Musk hit headlines yet again this week. After months of quibbling and quarreling, he added another twist to the Twitter debacle – by reopening his original offer to buy the company for $44 billion. Whether it’s set in stone this time around is anyone’s guess – but investors certainly got on board, sending Twitter’s shares up over 20% when the news broke.

Twitter stock

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How Low Can Tesco Go?

Tesco image

Tesco, the UK’s biggest supermarket, reported on Wednesday that its profit fell in the first half of the year.

What does this mean?

There’s a high-stakes game of limbo taking place in the UK right now, and it can be witnessed on every high street in the country. The contenders are Britain’s flock of supermarkets – only one of which can take first prize and win the hearts (and wallets) of the nation’s hard-up households. Tesco, for its part, has redoubled efforts to keep bargain-hunting customers from defecting to rivals, with a fresh price-freezing and price-matching bonanza. And with sales growth actually beating expectations, the numbers suggest the strategy has been pretty effective. But the sword that slashes prices is double-edged, and what it adds in sales, it cuts from the bottom line. No surprise, then, that operating profit fell by 10% in the period, with Tesco confirming profit for the full year will be at the lower end of its forecasted range.

Tesco stock

Why should I care?

The bigger picture: The throne’s secure for now.

It makes sense to take the threat posed by discount rivals seriously – after all, Aldi became the country’s fourth-biggest supermarket group just last month, with a 9.3% market share (overtaking Morrisons, which had sat in fourth spot since 2004). But it’s worth remembering that Aldi’s not on the level of Tesco just yet, whose formidable 26.9% share of the market and more than 3,000 stores overshadow Aldi’s single-digit portion and 970 shops.

Zooming out: Every little hurts.

The weak pound could pose a real threat to British supermarkets’ profits in the coming months. See, although the government’s U-turn on some tax cuts triggered a 10% rebound in the currency this week, many strategists think the reprieve will be short-lived. In fact, if the economy keeps stumbling the way it has been, analysts think the currency could hit a new record low by the end of the year.

Pound recovers


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