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Global trade impact of the coronavirus epidemic

Rain Wang Internet 2020-03-24 13:47:04
While there is still uncertainty about the impact of the COVID-19 on China’s productivecapacity, the most recent statistics point to a significant downturn. The full effect of COVID19 on global value chains will become clearer in the coming months. However, one question of importance is how a disruption in Chinese supply of intermediate inputs will affect therest of the world. Based on the analysis of this note, two key points can be made.

First, even if the outbreak of COVID-19 is contained mostly within China the fact that Chinesesuppliers are critical for many companies around the world implies that any disruption inChina will be also felt outside China’s borders. European, American and East Asian regionalvalue chains will be disrupted. The estimated global effects are subject to change dependingon the containment of the virus and or changes in the sources of supply.Second, it is expected that the spillover effects of a disruption in Chinese supply will bediverse across economic sectors and dependent on the geographic localization of the COVID19 outbreak and of the containment measures within China. For example, automotiveindustry’s intermediate exports may fall relatively more as the industry is geographicallylocalized in the region where the outbreak of COVID-19 occurred. Importantly, because oflack of information this note does not consider this second aspect. Once sectoral data onChinese output is available the likely effect on the various global value chains will becomeclearer.