International Economy asks the experts: “World trade has been collapsing faster than global GDP – indeed, faster than at any time since the Great Depression. How is this possible?” See the answers (pdf) from Jagdish Bhagwati, Barry Eichengreen, Gary Hufbauer, and others. They discuss commodity prices, the global fragmentation of the supply chain, and trade finance.
Steve Hanke had the shortest answer: “World trade is elastic with respect to global GDP. Accordingly, when global GDP slumps, we should expect an outsized plunge in world trade. Given the disruption in trade finance that has accompanied the Panic of 2008, we should also expect the current trade plunge to be more pronounced than usual. No surprises here.”