Forecasting 2024: Winning at Global Trade in the New World Disorder

2023 marked the end of the rocky recovery from COVID-19 and confirmed our transition to Globalism 2.0. At this time last year, we were still unsure about many of the trends that we now take for granted, like AI, trade war, and nearshoring.

2024 will see the new global economy take on a more defined form.? In the older Globalism Classic, trade was thought to be separate and more important than petty politics.? In Globalism 2.0, trade is politics, and we poor saps are left to manage as best we can.

?2024 will see the consolidation of trade blocs, ?bad governance, and the erosion of institutions.? You can turn this to your advantage by making the right moves early.?

Spoiler alert:? It will be a particularly critical year for SMEs and entrepreneurs seeking to access the US market.?

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1.???? ?Global Trade: ??

Globalism Classic (US-centric policy, post WW2 institutions) continues to transform into the more decentralized, ?competitive Globalism2.0 (Link: Globalism 2.0 is here. 5 Key Characteristics of the New Regionalism. | LinkedIn?) . ?

Trade blocs are replacing old school Globalism, and trade will continue to fragment in the coming year. ??In 2024 we’ll see the world split into two supply chains – sanction-compliant (US, Western Europe, Japan, Australia) and Non-compliant (China, Russia, MENA).

Fortune 500 MNCs will build on the progress they’ve been making since 2018 setting up two distinct supply chains to access the widest possible range of sources and markets.?

Chinese state champions and independents will work overtime in 2024 to establish or strengthen their presence in new manufacturing centers like Mexico and Vietnam before Washington can use its influence to poison the well.? Look for Mexico to install a CFIUS-type bureaucracy that will discourage official Chinese investment.?

China’s “carrot & stick” approach in SE Asia will have a degree of success, putting the supply chain through Vietnam at risk of contamination with restricted materials.??? ??

The Fortune 500 is ready, the Chinese are ready, and new manufacturing centers are getting ready.? Who’s missing from this picture?? ?

Small & medium-sized enterprises (SMEs) who have been manufacturing in China for the US market.? The Chinese Miracle of the 2000s enabled savvy marketers to use contract manufacturers in China to take their vague ideas and turn them into actual products.? In 2024 many of these companies will find themselves in an impossible situation.? They don’t have the know-how or resources to move out of China, but compliance issues and rising prices will make their business unprofitable.?

2024 will see the death of the “Produce Cheap in China, Sell Expensive in the US” model.? These once-entrepreneurial operators have become the most conservative force in the G2 economy.? They are opting to resist the shift - or acknowledging that they have no viable non-China option.? Either way, SMEs producing in one bloc but marketing to another will face their existential crisis in 2024.? Many will not survive.?

Final word:? Globalism2.0 will consolidate power further into the hands of Fortune 500.? New entrepreneurial models will eventually develop in North America and Europe as emerging trade realities and technology create new opportunities.?

The main story in 2024, however, will be the end of OEM or contract-manufacture-driven outsourcing.

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2.???? Mexico & the North American Trade Bloc

2024 will see Mexico move from strength to strength as nearshoring becomes mainstream.? Mexico shares a 2,000-mile land border with the largest market in the world and has deep cultural and regulatory ties with the US.? The auto industry in Mexico is the template for international investment, and we’re already seeing the aerospace, medical equipment, and electrical device markets following in its footsteps.

Mexico is in the right place at the right time with the right resources and the right connections.? What can possibly go wrong?? ?Quite a lot, as it turns out.?

Bad governance is the cloud hanging over 2024, and Mexico is no exception.? The present administration is ambivalent about trade, ?confrontational with the US, and ineffective at building infrastructure.? ?The likely new administration will be more business-friendly, but even though the election is this year, the effects won’t be felt until 2025.?

Final word:? Mexico will win 2024 unless it works very hard to blow it.

If the AMLO administration can maintain decent relations with the US, avoid the urge to nationalize more industries, and manage basic infrastructure (water, power, security) then 2024 will be a great year for business in Mexico.? It doesn’t SEEM like much to ask…

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3.???? AI and Chatbots

We’ve been using AI long enough to see that it has two basic usage models in business:?

a.???? Raise the quality of service to improve the welfare of everyone in the world or

b.???? Reduce expenses to boost profits for shareholders.? ?

So, AI will definitely be used to increase profits.

Will the AI apocalypse start in 2024?? Sure, but it won’t be Terminators or killer bots.? The dangers of AI are widespread dumbness and accelerated inequality.?

The dilemma facing decision-makers is that AIs can do a range of white-collar jobs about 75% as well as humans for about 2% of the cost.? Tech pundits like to say that AI is better than Human - but for things like customer service, writing, and sales support, chatbot performance is passable at best.?

2024 will see AI Chatbots deployed for mass market consumers, while premium customers will get humans supported by the new tech.?

Final Word:? 2024 will be AI's “Web2.0 moment”.?Before 2002, static websites were an exciting curiosity, but of limited usefulness to business. ??Once publishers could continuously add their own user-generated content, the tech’s utility exploded.? New businesses popped up, and entire industries were created or transformed.?

Likewise, AI is now ubiquitous and developed enough that every business can use it – or so the general market will believe. If your company doesn’t have an AI strategy in 2024, you run the risk of losing ground to competitors.?

Next year, AI will move from a gee-whiz phenomenon to a must-have business tool.?

4.???? China

The China Miracle of the 2000s was fostered by global opportunity and good central planning from Beijing.?

The China Reality of 2024 will see the continuing disintegration of the Chinese economy – driven by new types of global competition and bad central planning.?

The Xi administration couldn’t get out of its way in 2022 and 2023.? From Wolf Warrior diplomats to Covid shutdowns to trade war with the US, China seemed determined to undo two decades of progress.?

BRICs and the Global South – back to Mao.

By plan or by accident, China is returning to its “glory days” as leader of the unaligned bloc of nations.? China, however, ?has an unfortunate tendency to treat its enemies (whom China sees as "potential friends") better than it treats friends.? When Xi is selling BRICs or BRI, he is enthusiastic about reaching out and building ties.? But once a new client state signs on the dotted line, it’s all about the Chinese Win-Win.? China wins early, and then China wins later.?

In 2024, we’ll see this in action.? Vietnam, a long-term foe of China, will receive great treatment from the folks in Zhongnanhai (Beijing’s version of Washington’s K Street).? Russia, on the other hand, is already starting to feel pressure to transfer assets (for now) at distressed price levels.?

China isn’t big on colonizing.? It prefers suzerainty, where clients are permitted to manage their own internal matters but must defer to Beijing on international matters.? Look for Russia to take on more of a deferential role in 2024.

2024 is also the year that the word “embargo” enters the vocabulary in US-China relations.? ?The US-led restrictions on semiconductors as hobbled China’s technology ambitions and made a joke of Beijing’s “Made in China 2025” campaign.? ?Analysts have called semiconductors the oil of the 21st century.? Reading history has become unfashionable, but some of you may remember that an oil embargo propelled Japan into conflict with the US in the 1940s.?

Final word:?

China enters 2024 with all the wrong friends and a growing list of determined competitors.? After deftly managing the “frenemy” strategy for 20 years, Xi’s wolf-warrior approach has polarized international support and undermined China’s position as factory of the world.??

Unfortunately for those who want to continue working with China, the CCP is aware of the problem and is trying to help.? The party will be even more involved in day-to-day business in 2024.? Compliance with both PRC and US rules will be more difficult in the coming year.?

5.???? USA

2024 could be the year that the US re-establishes Pax Americana and leads the free world to prosperity, progress, and stability.? It won’t - but it could.

Over the last decade, the US defied all naysayers and progressive pundits who predicted its demise.? Through almost no effort of our own, the US has reasserted its position as the prime custodian of the global economy.? Russia effectively kneecapped its economy and political influence with its invasion of Ukraine.? China’s inability to manage COVID-19 and international competition is unwinding 20 years of progress.? ?The US started 2023 as the sole superpower with unprecedented influence over the direction of global trade.

Domestic politics, however, is driving the US to look inward and shun international leadership.?

Relations with Mexico are a prime example.? The US has identified China as a strategic competitor and wants to replace it with other, friendlier production centers.? You might think that would elevate Mexico’s status as a trusted ally, neighbor, and bloc member.? You would be wrong.? Republicans are actively talking about military action in Mexico to fight drugs and illegal immigration.? Border checks are wrecking trucking schedules.? Anti-Mexican racism is standard fare at political rallies – BY OFFICAL SPEAKERS.?

It is an election year, and we can count on candidates working hard to be the most nationalistic and “America First” in the race. ??It’s already begun and will continue through November.? It will be a long year.

Final Word

2024 will see the US become even more inward-looking and isolated, economically.? ?Look for new restrictions – and their inevitable unforeseen consequences.?

We’re probably 24 months away from the Senate subcommittee hearings on “how the US lost its leadership in global trade”, but that’s more of a 2025 or 2026 story.

For now, though, you need to find ways to minimize the adverse impact of policies and regulations.? Many people think that is always the way it is, but it gets ramped up a notch or 3 in 2024.?

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Action Plan for Decision Makers

2024 will bring new challenges – especially for small and medium players selling into the US market.?? There are things you can change, and things you have to accept.

Global trade is fragmenting, and you want to be in the right trade bloc.? I'm obviously favoring Mexico as a production base for the US market.? Others are choosing India or Vietnam.?

The point, however, is that you are probably not done adjusting your supply chain.

Relations between the US and China are bad now, and likely to get much worse in the areas that matter most to you – regulations, compliance, and government interference.?

The silver lining here is that your overseas partners and suppliers are facing the same challenges.? This is a great time to build or consolidate those international relationships that you need.?

For SMEs, 2024 will see intensified competition from MNCs who have the wherewithal to build out two completely separate supply chains.?

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