Trade Impact of the Pandemic

04 March 2020 |

While there is still uncertainty about the impact of the COVID-19 on China’s productive capacity, the most recent statistics point to a significant downturn. The full effect of COVID-19 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 the rest 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 Chinese suppliers are critical for many companies around the world implies that any disruption in China will be also felt outside China’s borders. Second, it is expected that the spillover effects of a disruption in Chinese supply will be diverse across economic sectors and dependent on the geographic localization of the COVID-19 outbreak and of the containment measures within China. Importantly, because of lack of information this note does not consider this second aspect. Once sectoral data on Chinese output is available thelikelyeffect on the various global value chains will become clearer.

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