UBS Finds Global Trade Structure "Surprisingly Stable" As AI Emerges As Growth Engine
Despite ongoing Gulf-related energy shocks, mounting concerns over a potential energy cliff (read here), and UBS last month reactivating its supply chain stress-watch coverage, another UBS analyst noted Wednesday that the overall structure of global trade remains "surprisingly stable."
Analyst Arend Kapteyn pointed out that the structure of global trade remains far more structurally stable than recent growth trends suggest, even as technology and AI-related categories have driven nearly 80% of recent trade growth while accounting for only about 18% of total exports.
The big takeaway is that technology goods are becoming the engine of global trade growth. This means that semiconductor chips, AI hardware, data-center equipment, and electronics now carry outsized importance for global trade volumes, corporate earnings, and freight demand.
"What is perhaps surprising is how little the structure of global trade has changed despite large shifts in annual growth drivers. To show this, we aggregate 97 UN Comtrade product categories into 14 subcategories across three broad buckets—consumer, intermediate, and capital goods," Kapteyn said.
Kapteyn continued:
The left-hand side shows contributions to global export growth. The early-1990s surge largely reflects the dissolution of the USSR and the entry of those economies into global trade data. The post-2000 expansion coincides with the rise of global supply chains, as goods crossed borders multiple times at different stages of production—mechanically inflating gross trade. This dynamic favoured intermediate goods, whose share rose from ~30% to ~40%.
At first glance, consumer goods (green bars) seem to grow more slowly. In fact, their share has increased—from ~23% in the early 1990s to nearly 30% today—because they have proved more resilient in downturns. Consumer trade fell less sharply during the GFC, the 2015 commodity downturn and strong USD episode, and the 2018–19 trade slump (when tariffs, tech, and autos were hit simultaneously). Partly reflecting that resilience, the intermediate share has since fallen back to ~30%. Tech trade spans multiple categories and is currently growing rapidly, but it's share is little changed from what it was in the late 1990s (i.e. 18%) and still a bit lower than its pandemic peak (20%).
Global Macro Chart of the Day
In the US, Goldman recently calculated that AI data center buildouts by hyperscalers will reach a staggering $800 billion by year-end.
Certainly, in the US, AI-related spending is boosting the economy, while China is preparing to spend upwards of $300 billion on data center buildouts over the next five years.
To sum up, global trade is being driven by technology spending, which has become a global growth engine. That makes AI and chips extraordinarily important.
If technology supply chains are the next beating heart for the global economy, then disruptions in chips, AI hardware, rare earths, Taiwan, China, or export controls can quickly ripple through supply chains, production, pricing, and capex much faster than traditional goods shocks.