COVID-19 Impact on Trade Flow as the World Adapts to the Pandemic

Abstract

Abstract Studies from early 2020 show extensive impact of COVID-19 on global trade. These findings did not hold as the world trade made rebound despite the pandemic. Literature does not explain impact of COVID-19 over the pandemic period of 2020–2022 and does not consider pre-pandemic shock on trade. We compared trade performance of 32 of the world’s largest trading partners representing Asia-Oceania, Europe and Americas over 56 months from 2018–2022 in Gravity set-up using PPML as a primary estimator. Our findings show that COVID-19 pandemic does not impact global trade if we consider the pre-COVID-19 and post-COVID-19 trades as of 2022. The world trade flow increased by 0.009% with COVID-19; exports increased by 0.11%, and imports increased by 0.07%. Trade flow, export and import also has positive direction with cases, deaths and vaccination. However, stringency measures of home have negative effect on trade flow and import from partners but positive effect on export to partners. Stringency measures of partner have negative effect on home countries’ trade flow with partner and home countries export to partner but have an insignificant effect on import from partner. Trade, export, and import declined in 2019 and 2020 but increased in 2021 and 2022 if 2018 is used as benchmark. The results suggest that Europe was the worst hit compared to Asia-Oceania, while America’s performance has been positive. We conclude that the pandemic impact is better assessed if we look at yearly effects, regional effects, along with stringency measures for partner and home country.