How Has COVID-19 Affected International Trade?
As consumption and production have fallen all over the world due to the COVID-19 pandemic, world trade and global economy are set to witness unprecedented disruption. Take a look at how the pandemic has affected global trade.
The year 2020 started with two superpowers, America and China, indulged in a trade war where both the countries increased the tariffs on their imports. As the countries started working towards de-escalation, the COVID-19 outbreak transformed life as we know it within 2-3 months.
The ongoing pandemic has already taken more than five lakh lives in more than 185 countries, and more than fourteen million people have already been affected by the virus. But apart from the enormous loss of lives, countries are also struggling with an unprecedented economic slowdown.
According to the World Trade Organization (WTO), global trade is expected to fall by 13%-32% in 2020 due to the pandemic and its impact on economic activities across the world. Consumption and production have fallen to record lows in many parts of the world, and recovery is expected to take several months and years even if the pandemic ends.
Here is a brief overview of how the pandemic has affected global trade-
Economic Impact of COVID-19 on Global Trade
While several policymakers and economists are now comparing the economic impact of COVID-19 to the financial crisis of 2009, things are more serious this time around. Not only in 2009 but even during the great depression during the 1930s, the entire global economic engine was still in decent shape, and banks had adequate capital.
But the pandemic occurred when the global trade was already trying to recover from the 2019 and early 2020 setbacks due to the rising trade tensions among countries. It has resulted in a complete shutdown of national economies, oil prices have fallen to record lows, and human labour that is necessary for production is under complete lockdown in many parts of the world.
Not only the superpowers like the USA, China, Russia, and Germany but even growing economies like India are on the brink of collapse.
Trade in India Amid Lockdown
As per the official data from the Commerce and Industry Ministry, India’s exports fell to a record 60.28% to $10.36 billion in April 2020. Imports also shrank by 58.65% to $17.12 billion in the same month. While the ongoing economic slowdown is also responsible for this severe fall in exports and imports, the lockdown in several countries is the main culprit.
The pandemic has resulted in severe disruptions in the supply chains, with several orders being cancelled by international buyers. Apart from pharmaceuticals and iron ore, all the 28 industrial sectors witnessed negative growth in April 2020.
With the policymakers now more focused on investing and improving the medical infrastructure of the country, international trade might continue to struggle in the coming months if adequate measures are not taken to revive the economy.
Global Coordination and Cooperation Essential for Recovery
In a way, the COVID-19 pandemic caught the entire world off the guard. No country was adequately prepared to fight a pandemic, especially one that escalated so quickly and reached more than 185 countries in less than two months.
The only way for the world, and even for the world trade, to recover is through coordination and cooperation. The countries should all come together and work towards fighting this pandemic and reviving global trade.
Now is also the time for businesses to rely on the knowledge and expertise of professional trade consultants who could recommend effective measures that can be adopted for accelerating recovery and minimizing import/export risks.