From China to Russia to Turkey to the United States, nationalist zealots around the world are erecting trade barriers and denouncing globalism, while intrepid businessmen seem to ignore them.
Despite the best efforts by proponents of the America First principle, global trade has for the most part gone up, up, and back. This is despite President Vladimir Putin’s invasion of Ukraine (and his recent apparent move to block grain shipments from the country), and despite the world, especially China, still emerging from the coronavirus doldrums.
David Hunt, CEO of PGIM, the wealth management arm of insurance giant Prudential Financial, hasn’t forgotten either.
,
It operates about $1.27 trillion. In my interview with Mr. Hunt, I mentioned deglobalization as an important political trend and asked him how seriously he took it.
“We don’t believe that deglobalization is happening or will happen,” says Hunt. “In fact, global trade flows are very strong today.
The numbers back it up. According to the United Nations Conference on Trade and Development (Unctad)Global trade in 2022 will reach a record high of $32 billion, up 12.3% from the previous year, up 25% from 2020 and up 13% from 2019 before COVID-19.
Ads – scroll to continue
Did you spot any trends here?
Indeed, global trade is doing well, but there are many important trends unfolding beneath the surface. First, it is true that global trade remained somewhat tepid, with a downturn in the fourth quarter of 2022 and the first quarter of this year. But it is rather a reflection of fears of a global economic slowdown, which may be waning, but not by any concerted or piecemeal effort by anti-globalists.
It is also worth noting that voters in some countries vote out leaders with nationalist tendencies. In Brazil, Luis Inacio Lula da Silva became president and Jair Bolsonaro stepped down. And of course in the United States, with Joe Biden in office and Donald Trump out of office — Biden is certainly more globalist than Trump, but he has maintained and even strengthened the trade barriers his predecessor had put up with China, especially in tech. And a powerful Republican anti-globalist force is influential in Congress.
Ads – scroll to continue
But when it comes to China, Hunt points out that its position in global trade is definitely evolving.
“What we’re seeing in the current and future wave of globalization is very different from what we’ve seen in the last 20 years, when it was mostly about China,” says Hunt. “What we’re seeing now is that it’s a regional story.” Again, the numbers back up Hunt. Merchandise trade between the United States and China Total imports and exports through May this year were about $220 billion, down from last year and down from 2019 levels, in fact about the same as activity a decade ago. Of note is the decline in US imports from China. Recent increases in grain and oilseed shipments have pushed exports to China to a record level of $62 billion in the first five months of this year.
These figures suggest that the sharp rise in Chinese exports to the United States may be over, at least for the time being. And much of it is the result of (in the words of Gwyneth Paltrow) “conscious uncoupling” or “risk aversion.” Choose your terminology. Specifically, tariffs and trade barriers, restructuring of corporate supply chains, and security concerns over Chinese technology and telecom hardware have all contributed to a decline in imports from China.
Ads – scroll to continue
This has undoubtedly weakened the Chinese economy, which may be why the Chinese are again willing to engage with senior US officials, including Secretary of State Antony Blinken, Treasury Secretary Janet Yellen, US Climate Minister John Kerry, and unofficial but important visits by Bill Gates and 100-year-old former Secretary of State Henry Kissinger. It’s mostly mere talk at this point, but China may be realizing that its growth path is inseparable.
But beyond China, global trade is entering a myriad of new dimensions, Hunt said. “Some countries are even more fragmented,” he points out. “Whether it’s happening in Indonesia, Vietnam or Mexico, logistics are becoming more regionalized, relying less and less on just one country.
Ian Bremmer, president and founder of Eurasia Group and a decades-long researcher of global political and economic trends, agreed in an email. “The difference now is that we no longer have the United States or anyone else to drive the expansion of globalization,” says Bremmer.
Ads – scroll to continue
“This was the first explosion in 50 years. “There is a real decoupling going on that will hamper global trade, but it will either be constraining (Russia out of the G7, strategic areas excluding the US and China) or gradual (moving to onshoring and nearshoring). And this will hamper existing investments and continued efficiency gains.
Unctad data backs up Bremmer’s view, pointing to so-called friend-shoring, “redirecting bilateral trade flows to favor countries that share similar political values.” Examples here include increased trade between the United States and Mexico, the European Union, Canada and Taiwan (all up about 1%), while trade from Ukraine to Europe surged by 20.5% in Q1 2023 compared to Q1 2022. On the downside, trade from China to the US and from Russia to Europe fell by 0.9% and 5.6%, respectively.
Hunt’s firm, PGIM—pronounced (pea-Jim) – itself a product of globalization. “This business was originally born out of Prudential Financial,” says Hunt. “About 30 years ago, [the investment business] Established as a separate business with a mission to build a large third-party business independent of insurance companies [and to take money from investors outside the company]. Currently, most of our commissions come from third party investors. ”
Ads – scroll to continue
Hunt said the company was named PGIM in 2016. “And it came out of our efforts to truly globalize our business,” he added. “In many parts of the world, the word ‘Prudential’ cannot be used because it belongs to Prudential PLC. [an unrelated United Kingdom insurer]PGIM was thus the name that could be used worldwide to designate a global investment manager. ”
PGIM has no plans to expand its activities on a global scale. “We remain deeply committed to our global business model and continue to invest in the international markets in which we operate,” Hunt told me. In fact, PGIM’s overseas workforce has grown 11% year-over-year, and he’s up 100% since 2018. Approximately 31% of our sales and investment professionals are currently based outside the United States.
More than a year ago, James Pesokowskis, a senior fellow at the American Enterprise Institute, criticized anti-globalist bluffing in a paper titled:Globalization is dead.Long live globalization“Despite all the talk about deglobalization, world trade as a share of gross domestic product is not far from its peak at the start of the 2008 global financial crisis,” Pesokokis told me. “Even the most obvious crisis point, US vs. China, may not be as bad or irreversible as many think. For example, the Biden administration seems to be backing away from its most ambitious restrictions on tech investment in China. big lebowski) would approve.
So let the politicians shout out loud. They never destroyed globalism. At least not yet.
Email Andy Serwer (andy.serwer@barrons.com).
