Have We Reached Peak Trade?

Have We Reached Peak Trade?

The Panama Canal is set to open its new wider canal on 26th June 2016. The CEO Jorge Quijano says that there are many opportunities for the canal to exploit. This is to say that the Canal has not reached its peak. When a business reaches its peak, it has no more opportunities to explore. At such a point the company has no growth and it becomes stagnant.

Just like businesses, the economy has periods of expansion and contractions. This is known as the economic cycle or the business cycle. Factors such as interest rates, employment level, GDP and consumer spending can be used to determine the current stage of the economic cycle. There are four stages in a business cycle. These are expansion, contraction, peak and trough.

During expansion, the economy experiences rapid growth, low interest rates and production increases. When this growth reaches its maximum output, this is the peak. Peak creates some imbalances in the economy which needs to be corrected. This correction occurs through the period of contraction. This is when growth slows, price stagnates and employment falls. When the economy hits the low point, the trough is reached and the recovery starts again. However, as Krugman who teaches economics at Graduate Center at City University of New York indicated, less trade does not mean the end of economic growth (Ho, Long & Brancaccio, 2016).

The Panama Canal is on the expansion stage. The canal has many opportunities to exploit. These include recovering what went to the Suez Canal. With the domestic gas and oil production increasing in North America, there will be more liquidities natural gas tankers from the U.S headed to the Asia (Ho, Long & Brancaccio, 2016). These tankers will use the Panama Canal.


Ho, J., Long, K., & Brancaccio, D. (2016). Have we reached peak trade?. Marketplace.org. Retrieved 24 June 2016, from http://www.marketplace.org/2016/06/20/world/peak-trade-globalization-krugman

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