Also: FexEx's big miss, TSMC's new chair, COVID-era CEOs outperform. 
Good morning from Geneva.
The headline seemed to signal that the death of globalization, long announced, is finally here: The UN’s specialized agency for trade and development, UNCTAD, reported last week that global trade tumbled down from its post-COVID high in 2023: it contracted 5%, or about $2 trillion, versus 2022.
But that top-line take-away belies new trading patterns that show just how far countries are going to do business with allies.
Behold the rise of so-called “friendshoring.” Countries that were geopolitically aligned traded over 6% more with each other, regardless of their physical distance, UNCTAD found. Conversely, countries that were geopolitically “distant” or “very distant” traded significantly less with each other.
In practice, it means a trade trench war has set in.
Ukraine, for instance, became more dependent on the EU in 2023 (+10%), while Russia became more dependent on China (+8%). Taiwan became less dependent on China (-2.2%) and more dependent on the U.S. (+1.3%) and Europe (+1.5%). And perhaps most significantly, the U.S. and China both became less dependent on each other (-1.8% and -1%, respectively).
According to Richard Kozul-Wright, a director at UNCTAD, “it doesn’t look like there is going to be a shift in attitude” in those frosty trade relations any time soon. “A lot of Western businesses are not happy with the Cold War attitude the governments have taken towards China,” he said. “But there’s not been a real significant shift from either side, despite recent high-level meetings.”
Amid the rise in “friendshoring,” another trade-related buzzword, “nearshoring”—or trading with geographical neighbors—declined year-over-year. As a result, “trade concentration” increased: countries relied on a smaller number of trade partners, which were not necessarily nearby.
Combine those trends with the recent news of trade disruptions in the Red Sea, where almost a third of global container traffic passes, and you can bet supply chain resilience will be a major concern in 2024.
Finally, UNCTAD noted, climate regulation tops the bill of new trade barriers. UNCTAD counted 2,366 climate-related non-tariff measures that restricted trade this past year, covering a quarter of global trade. Those regulations may help combat climate change in the long-term, but today the greatest victims are developing countries that are disproportionately shouldering the measures’ disruptive effects, the agency said.
More news below.
Peter Vanham
peter.vanham@fortune.com
@petervanham
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FedEx miss
FedEx shares plunged almost 10% in extended trading after the delivery company trimmed its revenue forecast for its fiscal year, which ends May 31. The company now projects a slight decline in revenue, blaming “volatile macroeconomic conditions.” FedEx also reported a 60% drop in quarterly operating income from its air delivery Express service, as the U.S. Postal Service, a major customer, shifts to cheaper ground-based delivery. Reuters
TSMC’s new chair
Mark Liu, the chair of Taiwan Semiconductor Manufacturing Company (TSMC), will retire next year. The company has designated CEO C.C. Wei as Liu's successor, which is still subject to shareholder approval. Both Liu and Wei have helped TSMC grow into the world’s leading manufacturer of advanced chips, supplying companies like Apple and Nvidia. Bloomberg
Pandemic-era CEOs
CEOs that started during the COVID pandemic, like UPS CEO Carol Tome or Tapestry CEO Joanne Crevoiserat, had to learn how to lead during a major global crisis, gaining skills in fast decision making and balancing stakeholder interests. Those lessons are helping companies even now that the pandemic is over: Firms that changed CEOs in 2020 have an average return of 55% over the past four years, compared to 50% for the broader S&P 500. Fortune
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CLO: Generative AI Uses and Risks In this CLO guide to Generative AI, chief legal officers learn how to navigate the benefits, challenges and legal risks this fast-growing technology may present for businesses. CLOs also have an opportunity to shape/influence its adoption. Read more.
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Check out the Fortune Cyber 60 |
These startups are helping fight cybercrime Fortune teamed up with Lightspeed Venture Partners to highlight 60 venture-backed startups that offer enterprise-grade cybersecurity solutions. See the full list here |
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