Covid 19 is one of the pandemics that has resulted in numerous effects, including social and economic factors. From March 2020, the World Health Organization (WHO) declared the Corona Virus outbreak a pandemic. As a result, most governments imposed different measures geared towards preventing its spread and aspect that directly affected businesses (Hayakawa & Mukunoki, 2021). For instance, with most governments declaring lockdowns and businesses closing down, all the domestic and international businesses have experienced a reduction in their profit margins. Since the emergence of Covid 19, different societies have been affected differently, depending on the number of international passengers visiting different countries, investments, and dependence on international trade (Hayakawa & Mukunoki, 2021). Due to these aspects, most international economists have conducted intensive studies on how Covid 19 influences international trade. This paper, therefore, seeks to expound on the influence of Covid 19 on international trade and how businesses have adjusted to remain on top of the market.
Covid 19 outbreak has had major influences on the importing and exporting countries. Since the Coronavirus is a highly contagious disease, different measures instituted include social distancing and lockdown measures. This has prevented most people from moving from one place to another or even going to their places of work (Hayakawa & Mukunoki, 2021). Most people working from home and some people being infected with this virus has directly reduced the workforce (Cai & Luo, 2020). As a result, these changes have reduced the supply of goods, shifting a country’s supply curve and making it steeper (Hayakawa & Mukunoki, 2021). With the lockdown measures being in place in different countries, the transportation sector for exporting countries has also been disrupted, leading to an increased transportation cost. This, in the long run, translates to an increase in the production costs and costs of products.
When analyzing the most striking impact of the current covid 19 pandemic, it has had huge disruptions on international trade and the global value chains (GVCs). Cai & Luo (2020) note that the shocks experienced in the GBVs have led to most of the globalized countries experiencing triple effects. The triple effects constitute a direct disruption in the supply, which has prevented the production of essential commodities. This is because Covid 9 mainly focuses on the world’s manufacturing heartlands and spreads fast in the other developing countries. The second effect relates to the supply chain contagion that has amplified the direct supply shocks (Cai & Luo, 2020). Due to direct supply shocks, the less affected countries find it challenging or expensive to acquire the necessary products that have been imported from hard-hit nations. Lastly, covid 19 has also resulted in demand disruptions to macroeconomic drops in the aggregate demand and investment delays by firms.
The importing countries have also experienced various changes as a result of Covid 19. For instance, the main effects have been experienced in the aggregate reduction in the demand of products and an increased cost at the ports and terminal handles. When a nationwide lockdown is imposed in any country, it reduces what people earn. As a result, this reduces their purchasing power. Even if people retain some of their earning, most people developed the fear of being infected. As a result, this reduced the number of times they visited retail shops to make purchases (Hayakawa & Mukunoki, 2021). This, in the long run, led to a shrinking demand for different commodities, and most of the importing countries could not place orders for some of their basic trade commodities.
A large section of importing countries has also suffered from supply shocks. For instance, when covid 19 reduces the production of a downstream product, it also reduces the import demands of upstream products that are, on most occasions, used by downstream products.
Despite such negative impact, Covid 19 has also played a role in promoting international positively. For instance, since its outbreak, most exporting countries have increased their sales of products such as medical supplies and face masks. For instance, China exported more face masks than any other product in May 2020, amounting to approximately $ 14 billion (Hidalgo, 2020). As a result, Covid 19 has also influenced international trade both positively and negatively.
Covid 19 is one of the fatal global health crises that has had a major impact on local and international economies. Covid 19 significantly differs from past economies since it is directly linked to globalization. With its ability to spread rapidly, different containment measures have impacted both the importing and exporting countries. Most of these countries have experienced reduced demand for products, reduced workforce, and supply shocks.
Cai, M., & Luo, J. (2020). Influence of COVID-19 on manufacturing industry and corresponding countermeasures from supply chain perspective. Journal of Shanghai Jiaotong University (Science), 25(4), 409-416.
Hayakawa, K., & Mukunoki, H. (2021). The impact of COVID-19 on international trade: Evidence from the first shock. Journal of the Japanese and International Economies, 60, 101135. https://www.sciencedirect.com/science/article/pii/S0889158321000149
Hidalgo, C. A. (2020). How COVID-19 has affected trade, in 8 charts (No. hal-03068965). https://www.weforum.org/agenda/2020/11/how-covid-19-has-reshuffled-international-trade/