By Josh Zumbrun in Washington, Feliz Solomon in Singapore and Jeffrey Lewis in São Paulo
The two-year trade war between the U.S. and China upended commerce world-wide, slamming the brakes on global trade growth -- but also delivering modest benefits to a handful of industries and countries that saw gains as the giants tussled.
Growth in global trade sank to a meager 1% last year, down from 4% in 2018 and 6% in 2017. It was the fourth worst showing in 40 years, and the worst ever outside a period of recession, according to International Monetary Fund data.
Several factors contributed to the slowdown, but analysts say the U.S.-China trade war was the single-biggest cause. The U.S. and China are the world's great buying engines, each pulling in over $2 trillion a year of goods. Trade between the two nations slowed as a result of tariffs and other measures, and the decline couldn't be entirely made up by purchases from other countries.
Behind the slump were falling U.S. sales to China of agriculture products, aircraft and machinery, while China's sales of electronics and industrial supplies to the U.S. dropped. In some cases foreign suppliers were unable to fill the void, so many measures of factory activity and demand slid.
"Global growth and investment would have likely been higher in the absence of trade uncertainty" from the U.S.-China fight, said Sergi Lanau, deputy chief economist at the Institute of International Finance.
Overall, China's imports dropped $59 billion in 2019, while American imports fell $42 billion, according to U.S. and Chinese trade figures compiled by Trade Data Monitor.
But the declines would have been much larger had trade not been diverted to many other countries. Of the 15 countries with the largest change in U.S. imports last year, 11 saw increases while only four saw declines. For China, seven countries experienced increases and eight saw declines.
Here's a look at the economies that picked up the slack in the global trading system.
China's loss was Vietnam's gain, accelerating a long-term trend of Chinese factories moving to Vietnam and other Southeast Asian countries where labor costs are lower.
Vietnam's apparel trade with the U.S. has been growing for years, and clothing made up about a third of the $66 billion in imports from Vietnam last year. But other categories of purchases from Vietnam are growing rapidly -- cellphone imports rose by about $6 billion, while furniture, telecommunications equipment and computer chips each saw a $2 billion increase in sales to the U.S.
Trade experts caution that such increases can appear larger than they really are, because the figures can reflect the rerouting of products from China "often not changing anything but the label on a box," to circumvent U.S. tariffs, said Dane Chamorro, a partner at the consulting firm Control Risks.
Other east and southeast Asian countries recorded smaller gains in U.S. shipments, including Taiwan, South Korea, Thailand, Malaysia and the Philippines.
Latin America's two largest economies -- Brazil and Mexico -- saw limited benefits from the U.S.-China dispute.
Brazilian farmers have enjoyed higher demand for soybeans, especially in 2018 after China halted such purchases from the U.S. While the American farm sector was mired in a deep slump, Brazilian oilseed exports to China climbed $8 billion in 2018 alone.
Last year wasn't quite as strong for Brazil, with soybean exports slipping amid an outbreak of African swine fever that decimated pig herds in China, cutting demand for soybean meal used as animal feed. Still, China's imports from Brazil climbed $2 billion last year and are up $20 billion since 2017.
Although Chinese buyers paid a premium for Brazilian soybeans, that didn't fully compensate for the global decline in commodity prices, said Flavio França, a soybean and corn analyst at Datagro in São Paulo.
"Farmers here were at least able to sell more and dry up some of their stocks in 2018, and they got some extra income that way," he said.
Meanwhile, U.S. imports from Mexico saw the second biggest gain of any U.S. trading partner after Vietnam. That came even while Mexico fielded its own trade issues with the Trump administration, including negotiating the successor to the North American Free Trade Agreement and U.S. threats in mid-2019 to impose tariffs on all Mexican exports unless Mexico slowed the number of Central American migrants arriving at the U.S. border.
The export engine of Europe, Germany, suffered from weaker demand in China as that country's economy slowed. Germany also paid a price from Chinese tariffs on U.S. exports: Bayerische Motoren Werke AG and Daimler AG's Mercedes-Benz build SUVs for the Chinese market in the U.S.
Meantime, Germany was rattled by a Trump administration threat -- never carried out, but never abandoned, either -- to impose tariffs on global automobile imports.
Trade went from a 1 percentage point boost to Germany's economy in 2017 to a 1.3 percentage point drag in 2018. Italy, however, was only marginally affected, and the rest of Europe received a modest support from trade, according to calculations by economists at JPMorgan.
While the Trump administration has threatened to impose broad tariffs on Europe for a range of reasons, the only ones actually implemented were global steel and aluminum tariffs in early 2018 and a relatively modest set affecting about $7.5 billion of goods that was allowed by a World Trade Organization ruling over European Union aircraft subsidies.
Despite sharp declines in Germany, overall EU exports to the U.S. climbed 10.3% in 2019. The Netherlands and France boosted sales to the U.S. by more than $5 billion each, Ireland by $4 billion, Belgium by $3 billion and Italy by $2 billion.
Airbus SE filled a void left by the grounding of Boeing's 737 Max jets, contributing to increased aircraft exports from France. Ireland and Belgium exported more pharmaceuticals and Netherlands boosted exports of petroleum products and industrial machinery.
While U.S.-Europe trade has held up surprisingly well amid its efforts to stay neutral in the global trade wars, foreign investment hasn't. According to figures released by the United Nations Conference on Trade and Development, foreign direct investment in the EU fell 15% in 2019 from 2018.
In 2019, Japan's exports fell 5.6%, marking the first annual decline in three years, according to data from the Ministry of Finance released Jan. 23. Exports to China declined 7.6%, while shipments to the U.S. dropped 1.4%.
However, recent signs suggest the worst may be over -- Japan's exports to China rose in December for the first time in 10 months.
Some economists say Japan's auto makers benefited from the U.S.-China trade dispute as China reduced tariffs on cars imported from countries other than the U.S.
China reduced tariffs on cars imported from countries other than the U.S. and helped companies such as Toyota Motor Corp., which exports its luxury Lexus line to China from Japan. Lexus sales last year in China including Hong Kong rose 25% to 202,000 units. Toyota's overall sales in China rose 9% to 1.62 million vehicles despite the weak market there.
With the U.S.-China trade war at a standstill, the International Monetary Fund predicts global trade growth will improve to about 3% in 2020, from about 1% last year.
For now, that forecast assumes the truces between the U.S. and major trading partners remain in place, and that a number of big emerging markets like Brazil, Mexico, India and Russia experience economic improvements. Bolstering those forecasts, global manufacturing data showed signs of stabilizing early this year.
But that outlook was largely formed before the coronavirus outbreak in China added a completely new sort of uncertainty to global trade in 2020. The virus is likely to cause at least some disruption to supply chains and trade as health officials around the world work to contain its spread.
And with the U.S. also retaining tariffs on nearly $370 billion a year of Chinese imports, it may be too soon to say the global trading environment will improve.
"While Vietnam, for example, may be winning some new factories, a downturn in U.S.-China trade and the rising tide of protectionism globally are big negatives," said Ben Bland, director of the Southeast Asia project at the Lowy Institute.
--Anthony Harrup in Mexico City,
in London and Megumi Fujikawa in Tokyo contributed to this article.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com and Feliz Solomon at firstname.lastname@example.org