Global economic outlook dims amid geoeconomic fragmentation

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Global trade and economic outlook | Competition over critical minerals | Semiconductor supply chains shift | Ending dollar dominance | More research from Hinrich Foundation

Global trade and economic outlook

The International Monetary Fund (IMF) and the World Trade Organization (WTO) published a pair of reports estimating future economic and trade growth. While the IMF’s World Economic Outlook sees a rocky recovery while closely examining the role of geoeconomic fragmentation in FDI flows, the WTO’s Global Trade Outlook expects goods trade to increase slightly more than expected.

Mentioned publications

1. World Economic Outlook: A Rocky Recovery– International Monetary Fund, April 2023
   The IMF alerts the world to the downsides of friend-shoring and increasing geoeconomic fragmentation.
2. Global Trade Outlook and Statistics – World Trade Organization, April 5, 2023
   The WTO expects annual goods trade in 2023 to increase by 1.7%, an improvement from its October forecast.

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Competition over critical minerals

In a new paper, the OECD notes a sharp increase in export restrictions on critical raw materials over the past decade. Cecilia Malmstrom sees hope for a new transatlantic trade accord amidst the scramble for rare earths, while Cullen S. Hendrix envisions the ups and downs of a new lithium discovery in Kashmir. South American lithium sources could help power America’s net zero transition but may be hampered by a history of American interventionism in the region. China may ban exports of magnet technologies used in green energy goods, while China may soon dominate the development of sodium-based batteries, per the New York Times. All of these developments point to a green upheaval and the new geopolitics of energy.

The Hinrich Foundation has made its own important contribution to this discussion with Akhil Ramesh and Rob York’s paper, Friend-shoring critical mineral supply chains.

Mentioned publications

1. Raw materials critical for the green transition: Production, international trade and export restrictions– OECD Trade Policy Paper, April 11, 2023
   Export restrictions on critical raw materials quintupled in the last decade.
2. Will the scramble for rare earths produce a transatlantic trade accord? – Cecilia Malmstrom, Peterson Institute for International Economics, April 6, 2023
   Can the US and the EU find common ground over critical minerals?
3. India's lithium discovery could boost green energy but creates problems in the region – Cullen S. Hendrix, Peterson Institute for International Economics, February 16, 2023
   India has discovered 5.9 million tons of lithium resources in Jammu and Kashmir.
4. Can South American Lithium Power Biden’s Battery Plans? – Kathryn Ledebur and Erika Weinthal, Foreign Policy, April 12, 2023
   Latin American lithium powerhouses may be wary after a history of US interventionism.
5. China Plans to Ban Exports of Rare Earth Magnet Tech –Yomiuri Shimbun, April 5, 2023
   China may ban exports of technologies needed for magnets used in EVs and wind turbine motors.
6. Why China Could Dominate the Next Big Advance in Batteries – The New York Times, April 12, 2023
   China is leading the development of rechargeable batteries using sodium to replace lithium.
7. Green Upheaval: The New Geopolitics of Energy – Jason Bordoff and Meghan L. O’Sullivan, Foreign Affairs, January/February 2023
   Will national security concerns and geopolitical competition undermine the transition to net zero?
8. Friend-shoring critical mineral supply chains - Akhil Ramesh and Rob York, Hinrich Foundation, April 4, 2023
   The world is reconsidering its dependence on China for critical minerals.

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Semiconductor supply chains shift

Japan announces semiconductor equipment export restrictions that will affect Chinese production, reports Nikkei Asia. China alleges that an agreement amongst the US, Netherlands, and Japan to restrict exports to China violates WTO rules, while launching its own review of imports from US chipmaker Micron. Thailand, Vietnam, India and Cambodia are gaining from efforts to diversify chip suppliers, writes Bloomberg. In the aftermath of US export restrictions, China may expand its share of the mature chip sector, notes the Rhodium Group in a new report.

Mentioned publications

1. Japan to restrict chipmaking equipment exports, with eye on China – Nikkei Asia, March 31, 2023
   Japan announces restrictions on semiconductor equipment exports to China.
2. China seeks WTO review of chip export restrictions led by US – Cyril Ip, South China Morning Post, April 5, 2023
   Could an agreement between the US, Netherlands, and Japan violate WTO rules?
3. Beijing chooses targets carefully as it goes on offensive in US chip wars– Financial Times, April 10, 2023
   China launched a cybersecurity review of imports from America’s largest memory-chip maker, Micron.
4. Four Asian Countries Lead in US Chip Diversification Move – Bloomberg, April 6, 2023
   Thailand, Vietnam, India and Cambodia have seen significant increases in semiconductor exports.
5. Running on Ice: China’s Chipmakers in a Post-October 7 World - Jan-Peter Kleinhans, Reva Goujon, Julia Hess, and Lauren Dudley, Rhodium Group, April 4, 2023
   China is expanding production in mature chip sectors even as high-end production faces restrictions.

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Ending dollar dominance

During his recent visit to China, Brazilian President Lula calls for an end to dollar dominance in trade transaction, reports the Financial Times. The RMB can’t replace the dollar until China loosens capital controls, notes Shang-Jin Wei in Project Syndicate. Carla Norloff, writing in Foreign Affairs, explains why the dollar still dominates.

Mentioned publications

1. Brazil’s Lula calls for end to dollar trade dominance – Financial Times, April 13, 2023
   Brazilian President Lula, visiting China, calls for developing countries to trade in their own currencies.
2. A Reality Check for the Renminbi – Shang-Jin Wei, Project Syndicate, April 6, 2023
   The RMB can’t replace the dollar without loosening capital controls.
3. The Dollar Still Dominates: American Financial Power in the Age of Great-Power Competition – Carla Norloff, Foreign Affairs, February 2023
   Will geopolitical divides undermine the dollar’s dominance?

More publications from HF:

• The geopolitics of climate change and cleantech
• Harnessing trade policy to build India’s semiconductor industry
• Will war in Ukraine unperch US dollar preeminence in global trade?

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