Global commodity prices are facing significant declines, signaling potential troubles for the world economy. The S&P GSCI index, which monitors commodities across energy, metals, and agriculture, has dropped over 8% since April 2, following U.S. President Donald Trump’s announcement of new tariffs on Chinese imports.
This downturn persisted despite a brief recovery after Trump suggested a tariff reversal, which was overshadowed by a further increase in tariffs on Chinese goods to 125%. Economists are sounding alarms over this sharp decline.
Marko Papic, a macro and geopolitical expert at BCA Research, described the drop in commodity prices as a potential indicator of an impending global recession. As the world’s largest consumer of commodities, China’s economic health is vital, and elevated tariffs are likely to hinder its growth and energy consumption, impacting various commodities.
Of all commodities tracked, energy saw the steepest fall, approximately 12%, while industrial metals went down by around 9%. Soft commodities recorded a decline of roughly 5.2%.
Concerning oil, despite a slight rebound, prices remain significantly low with Brent crude around $64.78 per barrel and West Texas Intermediate at $61.77. Goldman Sachs has revised its oil price forecasts downward, estimating Brent at $62 and WTI at $58 by year-end.
Growing recessionary fears in the U.S. are exacerbating the situation. JPMorgan anticipates a slight contraction in GDP this year.
The correlation of declining crude oil prices since early April highlights that markets are preparing for a recession. Sabrin Chowdhury from Fitch Solutions indicates the likelihood of a U.S. recession exceeding 50%.
Copper, a crucial economic indicator, has also suffered due to the situation in China and its associated weak property market. Currently trading at $8,380 per ton, copper futures have plummeted over 16% since April 2.
Goldman Sachs predicts further declines, foreseeing prices potentially reaching lows akin to those during the initial trade war and the COVID-19 pandemic if the recession materializes.