The Tradeshift
Index of Global
Trade Health

Q1 2022

The Tradeshift Index of Global Trade Health | Q1 2022

Tradeshift’s Q4 Index offered some hope for a
gradual easing of the bottlenecks which had
hampered global trade throughout 2021.

A newchapter in
the age of
uncertainty

But the world had other plans. Global
supply chain activity dropped by 7 points
compared to our forecast range in Q1 as
Russia’s aggression in Ukraine brought afresh dimension to an already challenging
global trading environment. China’s zeroCovid policy, which has led to yet anotherround of lockdowns in major cities acrossthe country, is also creating problems withport congestion once again reaching record
levels. Our data shows supply chain activity in
China fell by a further 3 points in Q1, the third
successive quarter of lost trade momentum.
Manufacturers, particularly those in theindustrial heartlands of Western Europe,
have been hardest hit by the combination ofsky-rocketing commodity prices, lengthening
lead times, and a cost-of-living crisis that isharming consumer confidence and threatening
to squeeze spending. Transaction volume
growth across the Eurozone fell by an alarming
14 points with economists warning thatheavily industrialized countries including
Germany could be heading into a recession.
Our data suggests that demand has been
softening for the past six months, butlogistical snags are keeping output costs
high. In such a challenging environment,
it’s no surprise buyers are reining back on
new orders. Global order volume growth
fell 16 points against our forecast range in
Q1, not quite the 21 point fall we saw at the
beginning of the pandemic, but not far off.

Order volumes may be falling, but invoice
volumes on our platform remained relatively
stable in Q1, suggesting there is still abacklog of orders for suppliers to workthrough. The real test for supply chains will
likely come in Q2 and Q3. If orders continue
to fall, then suppliers may have to dig into
cash reserves in order to stay afloat.
In a perfect world buyers and suppliers would
be working together to plan for and address
such challenges as they arise. Unfortunately,
our data suggests the opposite, with latepayments to suppliers trending at almost
double the rate we saw in the six months prior
to the pandemic. Buyers seem to be focusing on
building up cash reserves to offset challenging
market conditions. As we learned early on in
the pandemic, such acts of self-preservationon the part of buyers can quickly turn into
acts of self-harm as cash flow pressuresbegin to take their toll on vital supply lines.
Commentators, including Blackrock CEO Larry
Fink, believe that the war in Ukraine will prompt
companies to pull back from their global supply
chains. Interestingly, our own data suggests
countries bordering the US, including Mexico
and Canada are already benefiting from apush towards nearshoring. Reconfigurationon this scale will require buyers to identify,
vet and onboard an entire ecosystem of new
suppliers. Globalization may well be on thewane, but resilience will depend on supply
chains becoming more connected, morediverse, and more collaborative than ever.

p.2

Q3 2022
2021
The Tradeshift Index of Global Trade Health | Q1

At a glancefindings

1. Global transaction volume growth dropped
a further 7 points against the forecast
range as the Ukraine crisis and lockdowns
in China brought renewed pressure tobear on snarled supply chains. Ordervolumes fell by an alarming 16 points.
2. Buyers appear to be building up cash
reserves by deferring payments to
suppliers. Late supplier payments averaged
15.9% of the total volume over the past
six months, nearly double the number inthe six months prior to the pandemic.
3. US supply chain activity slipped into the
red zone in Q1. Cumulative transaction
volumes fell 6 points against the prepandemic forecast range. Falling invoice
numbers suggest component shortages
and long lead times are hitting fulfilment.
4. Countries bordering the US are benefitingfrom a ‘nearshoring boom.’ Invoice traffic
from Mexican suppliers has risen at 4.1
times the global average over the past
year. Canadian supplier invoices were
3.1 times higher than the average.

5. Supply chains across the Eurozone had themost challenging quarter. Order volumes
fell by 28 points compared to the previous
quarter as supply chain shortages and highinflation hit the region’s manufacturers.
6. Global manufacturing supply chains have
faced a challenging combination of supply
chain shortages and rising commodities
prices. Our data shows that transaction
volumes in Q1 were 25% below the levels
we would expect to see for the period.
7. In China, total transaction volume growth
dropped by a further 3 points, the third
successive quarter that we have seen
momentum slip against our forecast range
8. The UK was the only region where supply
chain activity grew at a faster rate than
expected. Total transaction growth wasa point higher than the forecast range in
Q1, but overall growth since the pandemic
is still barely half the level it should be

p.4

The Tradeshift Index of Global Trade Health | Q1 2022

Volatility
snapshot
Cumulative activity growth between
buyers and suppliers on the Tradeshiftplatform since Q1 2020

p.6

The Tradeshift Index of Global Trade Health | Q1 2022

A cocktail of fresh challenges andfamiliar problems hit global trade

Orders drop like a stone while latepayments continue to hurt suppliers

Cumulative transaction volume growth (orders + invoices)
indexed against pre-pandemic forecast

Cumulative growth in invoices and orders indexed against pre-pandemic levels
110

120

100
90
100

80
70
60
Q1'20

80

Q2'20

Q3'20

Q4'20

Invoices
60

Q1'21

Q2'21

Q3'21

Q4'21

Q1'22

OrdersOverdue invoices as a percentage of total - pre-pandemic comparision
20%

40
Q1'20

Q2'20

Q3'20

Q4'20

Q1'21

Q2'21

Q3'21

Q4'21

Q1'22

15%
10%

Global

US

UK

EUR

CNY
5%

Global transactions dropped a further 7 points

and resurgent bottlenecks represent a sizeable

against the forecast range, wiping out much of“sneeze” from the world’s largest economy.

the recovery from the previous 18 months.
Chinese port congestion hit a five month peak in

0%

Sept 19 - Feb 2020

Sept 21 - Feb 2022

percentage of invoices marked overdue

Across the Eurozone, supply chains already snarled

March according to Lloyds List. Our data shows tradeby the pandemic were hit hard by the war in Ukraine,

activity in China slowed by a further 3 points after a 10

Order volume patterns act as a kind of early warningand the return to a ‘supply-crunch’ triggered bywhich has led to a growing shortage of key components.

point fall in Q4. Q1 is typically a slow period in China

system for changes in the economic landscape. We

geopolitical tension and lingering COVID restrictions

Tradeshift’s data shows transaction volumes

because of the Lunar New Year holiday and our Index

saw a steep fall in orders at the beginning of 2020

dropping a further 14 points in Q1, the steepest loss

accounts for such seasonal variations. Neverthelesswhen many businesses were predicting a long

The fact that invoice traffic remains steady suggests

of momentum since the beginning of the pandemic.

the continued loss of momentum raises difficultand painful recession. When consumer purchasing

suppliers are still working through an existing backlog. A

questions about China’s zero-Covid approach.

bounced back unexpectedly we saw a big spikes indrop off in orders could see suppliers having to dig into

order volumes as buyers rushed to fulfil demand.

working capital reserves to make ends meet in coming

Our Q4 Index suggested trade activity in the US
was starting to settle into a normal rhythm, withThe UK was the only country where trade activity

quarters. That challenge will be far harder if buyers

transaction volumes coming to within a whisker

rose against expected levels, albeit from a low base.

A 16 point fall in orders in Q1 is alarming andcontinue to squeeze supplier payments. Tradeshift’sof pre-pandemic forecasts for cumulative growth.

Transaction volume growth inched up by a single

suggests buyers are once again bedding in for adata suggests 15.9% were paid late in the six months

A 6 point loss of momentum in Q1 suggests thepoint in Q1, but overall growth in activity since thechallenging economic period. It also suggests anleading up to February 2022, nearly double the levelcombination of rising inflation, cooling demand

pandemic is still only half the forecast range.

end to the ‘demand-crunch’ cycle of the past year,

we saw in the six months leading up to the pandemic.

p.8

The Tradeshift Index of Global Trade Health | Q1 2022

Activity across nearshoring
hotspots is rising sharply
Transaction volumes - Year on year growth comparison
against global growth average (Q1 '21 vs. Q1 '22)
5

4.1
4

3.2
3

2

1.9

1.2
1

TurkeyMexicoBrazil

1.3
Malaysia

CanadaIn the next five years, reshoring and nearshoring

And in South-East Asia, politically unaligned countries

will relocate up to 26% of world production

such as Malaysia are benefiting from a growing

according to McKinsey Global Institute.

‘friend-shoring’ trend, where businesses look to shift
local supply away from areas of geopolitical tension

Tradeshift’s data indicates that activity across a number

and into more neutral and stable territories.

of ‘nearshoring hotspots’ has risen at a far faster pacethan the global average. For example, activity in countries

While we must caveat that the growth we’re seeing

bordering the US appear to have risen at the fastest

is coming from a relatively low base, the trendpace. Invoice traffic from Canadian suppliers was 3.2

appears consistent with the growing appetite fortimes higher in Q1 than during the same period a year

more localized supply lines. It will be interesting toago. Mexican supplier invoices were 4.1 times higher.

see how factors such as the Ukraine conflict andgrowing focus on ESG among large corporates

It’s not just suppliers close to the US that appear tobe benefiting. European textile manufacturers are
increasingly looking to move operations to Turkey.

accelerate this trend in the months to come.

Q1
momentumdeep-dive
Quarter on quarter performanceacross key territories

The Tradeshift Index of Global Trade Health | Q1 2022

US: Still top of the class,but fading

Eurozone: Caught in the middle ofconverging crises

US trade activity - quarter on quarter index scores

Eurozone trade activity - quarter on quarter index scores

Below expected range

Within expected range

Above expected range

Below expected range

Within expected range

Above expected range

US transaction volumes tipped into the

Invoice volumes remained in the normal range in

Supply chains across the Eurozone had another toughInvoice volumes remained relatively robust in Q1,

red zone in Q1, as rising inflation, coolingQ1, but a 4-point drop compared to the previous

quarter as overall transaction activity across the region

suggesting suppliers are still working their way

demand and fresh congestion at US ports hit

quarter could be the first sign of a return to thefell a further 5 points below the expected range.

through a backlog of existing orders. Some bottlenecks

supply chain activity across the region.

capacity issues and supply chain bottlenecks thatleft suppliers struggling through much of 2020-21.

Some of the slowdown is seasonal. Businesses

may be easing, but the outlook suggests a toughOrder volumes across the region dropped by an

few months ahead as fresh disruptions emerge.

alarming 28 points in Q1 as the Ukraine crisis

restocked inventories heavily in an effort toEconomists have warned that GDP growth could

turbocharged commodities prices and caused

According to JP Morgan Asia-Europe routes have been

get ahead of supply chain issues for the winterslip into negative territory for the first three months

further disruption across key supply chains.

worst hit by issues including acute port congestion

holidays. US order volumes on our platform shotof the year. But the consensus appears to suggest

up by 21 points in Q4, but then flattened in Q1

this will prove to be a short term hiccup. And while

In Germany, 40% of industrial companies said they

airspace. Given the rigidity / inflexible nature of mostat just below the normal range for the period.

the picture may not be quite as rosy as it appeared

foresaw problems with a lack of supplies according

supply chains, it is likely to prove very difficult toat the end of 2021, US trade activity remain into think tank IW. Automotive manufacturers

find fast and workable solutions to these issues.

relatively rude health compared to other territories.

have been closing assembly lines due to the

Data from ISM suggests COVID containmentand cargo disruption due to the closure of Russian

measures in Asia combined with rising energy costs

shortage of wiring harnesses manufactured inare contributing to a softening in order volumes.

Ukraine by the German company Leoni.

p.12

The Tradeshift Index of Global Trade Health | Q1 2022

UK: Modest progress,
but a long road ahead

Uncertain outlook hits
manufacturing and tech

UK trade activity - quarter on quarter index scores

Quarter-on-quarter transaction volumes - Index scores by sector

Below expected range

Within expected range

Above expected range

T&L

Manufacturing

Retail

Tech

Q1'21

104

104

86

93

Q2'21

91

92

83

89

Q3'21

97

110

95

105

Q4’21

104

73

95

94

Q1’21

101

75

94

86

significantly
below expectation

below
expectation

withinexpected range

above
expectation

significantly
above expectation

UK supply chains activity had a relatively promisingchains less severely than its European peers who are

Geopolitical tension and renewed lockdowns infrom Enterprise Technology Research shows somequarter with overall transaction activity risingmore dependent on Russia for energy and goods.

China are creating logistical challenges for supply

buyers have adopted a wait-and-see approachten points compared to the previous quarter.

While supply chain pressures appear to be less severe

chain operators. Our data shows transaction

in Q1 given macroeconomic conditions.

than in the Eurozone at present, our data shows

volumes across the transport and logistics industry

Invoice volumes climbed back into the normal range

UK supply chains continuing to trail other Westerncontinue to run at a higher than expected rate,

This caution must be weighed against the pressure on

having dropped sharply in Q4. Growth in real-terms

economies in terms of recovery since the pandemic.

suggesting fierce competition for limited capacity.

businesses to digitize key operations as part of overall

remains unspectacular however, and an 11 point

resilience measures. A separate study by Bain & Company

fall in order volumes suggests high inflation and theAccording to one report, UK exports fell 14 per

Manufacturing supply chains have faced a challenging

found that 77% of large organizations plan to increasewell-publicized cost-of-living crisis are hitting demand.

cent in the three months to January compared withcombination of supply chain shortages and rising

their IT spending in 2022 compared to the previous year.

Manufacturing sentiment scores compiled by S&P

same period in 2020, prior to the pandemic. On

commodities prices. Our data shows that transaction

Global hit a 13-month low in March, citing escalating

current evidence, it may be a long road back.

volumes in Q1 were 25% below the levels we would

Transactions across retail supply chains appear to

expect to see for the period. Much of this slowdown ishave stabilized after a period of extreme volatility overcoming from a steep drop in fresh orders, which ended

the past two years. Activity remains slightly below theQ1 at their lowest level since the first COVID lockdown.

expected range however, with a combination of rising

inflationary pressures as one of the driving factors.
Analysis from the Economist Intelligence Unit
concludes that the conflict in Ukraine will hit UK supply

costs and waning consumer confidence likely factors.
Software and technology purchasing was also
lower than the expected range in Q1. Survey data

p.14

The Tradeshift Index of Global Trade Health | Q1 2022

Final thoughts from Christian Lanng,
CEO and co-founder, Tradeshift

A troubled
world
demands a
new set ofoperatingprinciples

The time has long since passed when
supply chain disruptions could be treatedas one-off. Businesses used to extended
periods of relative stability are now seeing
crises begin to merge into one another.
Over the last five years the cumulative impact
from ever-increasing costs in Asia, geopoliticaltensions and trade tariffs, the pandemic’s
turbulence in global shipping and now themilitary conflict in Europe have exposed the
profound interdependencies and inherent
vulnerabilities in lean, globalized supply chains.
Business leaders are increasingly taking thelong-term view, recognizing that the latest
crisis is most likely to elevate still further
the importance of the structural changes
to global supply chains that were alreadyaccelerating as we emerge from the COVID-19
pandemic. We’ve come to recognize thereality that backlogs and breakdowns are
the new normal. Connectivity, transparency
and agility have become basic operating
principles rather than vague ambitions.
Research by Goldman Sachs suggests US
companies are ploughing ahead with efforts
to diversify supply chains with a particularfocus on moving manufacturing imports awayfrom China. Earnings call transcripts show ajump in the number of companies that plan topermanently increase inventories to protect
against production disruptions. Such a shift will
require a far deeper and more collaborative
relationship between buyers and suppliers.
Resilient organizations will proactively drive
down their costs while paying close attention
to any impact their actions may have on
the overall health of their supply chain. As
buyers look to move away from singlesourcing models, the case for a dynamicallyconnected ecosystem of buyers and suppliers
is also becoming increasingly undeniable.
Cloud-based B2B marketplaces were alreadygaining momentum prior to the pandemic.
Analyst firm IDC believes that this model,
which connects multiple buyers with multiple
suppliers, has a key role to play helping largeorganizations build resilience by offering easieraccess to suppliers and enabling far greater
visibility all the way down the supply chain tosource. For our own part, Tradeshift has seenhuge demand for our marketplace offeringover the past year, and we expect that trend
to accelerate for the foreseeable future.

p.16

Purpose

About
Tradeshift’sIndex ofGlobal Trade
HealthMany of the world’s largest buyers andtheir suppliers use Tradeshift’s tradetechnology network to exchange digitizedpurchasing and invoicing information.
The data these transactions yieldprovide us with a unique awareness of
trading activity between businesses.
Tradeshift’s Index of Global Trade Healthanalyzes anonymized data flowing across
our platform to reveal a timely perspective of
how external events are impacting businessto-business commerce around the world.

A reading of 100 indicates growth in line withexpectation against historical trends. Readings
greater than and below 100 indicate abovetrend and below-trend growth.
We consistently strive to improve and evolve
the accuracy of our analysis. As a result it ispossible that from time to time you may see
small revisions to historical numbers reported inprevious versions of the Index.
How to read the charts

On pages 7 to 8 we have expressed the index
scores cumulatively from Q1’20 onwards.
If the index score in Q1’20 is 90 this would
indicate that activity was tracking at 10 points
We acknowledge that there are limits to how
below the baseline for that period. If our index
accurately our view of what is happening on our score for the next quarter is also 90, then the
network can reflect how complex global supply cumulative score in Q2 would appear as 80,
chains are reacting to a variety of externalsuggesting activity is losing momentum against
factors. What our data does provide is a useful
where we would expect it to have reached bysnapshot that provides clues as to what mightthat period.
be happening to the global economy. The
patterns we see in our data become more
Looking at the data in this ways helps show
valuable as we combine them with other thirdhow much momentum transaction volumes lost
party data and expert insight, something which during the early stages of the pandemic. It also
you will see us draw on throughout this report.
gives us some clues as to how long it mighttake before cumulative growth normalizes
against projections we made based ontransaction flows prior to the pandemic.
The new model compares business-to-business
transaction volumes (orders processed fromOn pages 11 to 13, we looked at how index
buyers and invoices processed from suppliers)scores are changing quarter on quarter.
submitted via the Tradeshift platform since Q1
Looking at the data in this way provides a2020 against a ‘baseline’ we have created by
useful indication of how the level of activity
analysing medium-term seasonal trends in theis fluctuating across different sectors andtransaction data that flows across our platform. geographies from one quarter to the next.

Methodology

p.18

About Tradeshift
Tradeshift is a market leader in e-invoicing and accounts payable
automation and an innovator in B2B marketplaces and providing
access to supplier financing. Its cloud-based platform helps buyers
and suppliers digitize invoice processing, automate accounts payable
workflows and scale quickly. Headquartered in San Francisco,
Tradeshift’s vision is to connect every company in the world, creating
economic opportunity for all. Today, the Tradeshift Network is home
to a rapidly growing community of buyers and sellers operatingin more than 190 countries. Find out more at: Tradeshift.com© 2022 Tradeshift Holdings, Inc. or a Tradeshift affiliate company. All rights reserved.
The Tradeshift Global Health of Trade Index and this report are copyrighted works. This
document is protected by U.S. and international copyright and intellectual property laws.
It may be linked to and referenced with the following attribution “Tradeshift © 2022
Tradeshift Holdings, Inc.”
Tradeshift is a registered trademark or trademark of Tradeshift Holdings, Inc. in the UnitedStates and/or other jurisdictions. All other marks and names mentioned in this article may
be trademarks of their respective companies.
This report is intended for information purposes only, is based on a segment of industry
data and may not prove to be an accurate representation of trade volumes. Tradeshift
makes no warranty or representation as to the accuracy of this information.