How Resilient was Trade to COVID-19?

Abstract

We examine the supply-side characteristics -unskilled labor, imported input intensity, dependence on inputs from China, production complexity -that determine different potential vulnerabilities of traded products to the COVID-19 pandemic. Relying on monthly exports at the product level by all countries to the United States, Japan, and all 27 European Union countries from January 2018 to December 2020, we estimate a difference-in-differences specification of the COVID-19 incidence (deaths per capita) mediated by product vulnerabilities. We account for the precise lag between when the COVID-19 shock hit the exporting country and when exports reach their destination country relying on the products' type of transportation and distance between exporter and importer countries. Higher reliance on foreign inputs, on China as input supplier, on unskilled labor and a lower degree of complexity negatively affected exports as a result of this shock.

The trade impact of the COVID‐19 pandemic

“…This reveals that, for products with high contract intensity, for which it is costly to sever relationships, imports are more resilient to the impact of COVID‐19 deaths and to lockdowns, which have a temporary nature. This result resembles a key finding of Bas et al ( 2022 ). Note that the estimated coefficients on the ROW variables remain virtually unchanged when the interactions with contract intensity are introduced.…”

“…Some of these empirical studies focus on China (Che et al, 2020 ; Friedt and Zhang, 2020 ; Pei et al, 2021 ), but their data go only until mid‐2020, thus stopping before the end of the first wave of the pandemic. 4 Others use datasets from other countries, like Kenya (Socrates, 2020 ) and France (Bricongne et al, 2021 ), or for multiple economies (Bas et al, 2022 ; Berthou and Stumpner, 2022 ; Espitia et al, 2022 ; Hayakwa & Mukunoki, 2021 ; Kejzar and Velic, 2020 ). A common finding is that the pandemic has negatively affected international trade flows.…”

“… 5 Like us, Bas et al ( 2022 ) use both COVID‐19 deaths and lockdown stringency throughout their analysis. They use monthly import data for the United States, Japan, Germany and France until July 2020, and conclude that the negative trade impact of the pandemic on these four countries stems mainly from inputs whose supply relies on China and that require a high degree of customization.…”

International Trade Spillovers from Domestic COVID-19 Lockdowns

“…The result that the COVID-19 shock had a larger effect on trade for products that reply on intermediate inputs from China is also shown in a cross-country setting byBas et al (2022).4 Similar evidence is shown also using trade data Majune and Addisu (2021). find that the introduction of lockdown measures by Kenya's trading partners had a negative effect on imports, which fell by 23% on average after the measures were put in place.…”

Globally Engaged Firms in the COVID-19 Crisis

“…Sector characteristics related to the inputs used in production (e.g., whether inputs are imported and in particular from China and the intensity of unskilled labor use) are shown to drive the negative effect of the COVID-19 shock on exports (Bas et al, 2022). Country characteristics pertaining to the severity of the domestic shock (see Almunia et al (2021) for Spain) and the extent of credit constraints (see Paravisini et al (2015) for Peru) also seem to have mattered for firms' trade adjustments during the GFC.…”