Covid-19 – Six Lessons for International Trade

Authors

• Novy
• D.

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• Trade is more volatile than the general economy. Expect therefore a sharper fall in international trade than GDP.
• The Covid-19 slump is a combined supply and demand shock. Expect disruptions for global supply chains and pressure from squeezed trade credit.
• The big danger of a prolonged slump is the disintegration of trading networks. The longer the Covid-19 disruption lasts, the more likely trading relationships between firms will break down, preventing a swift recovery.
• Rethinking extreme events and resilience: static vs. dynamic efficiency. Cost minimization in good times might not be a sustainable model for long-term economic success.
• Will Covid-19 make firms scale back international value chains? Not necessarily. A more resilient network could mean more international diversification.
• Will protectionism lead to less international trade? It depends on how successfully elected leaders face up to the challenges of the crisis.