War Sets Back The Global Recovery

Global Trade and Value Chains in the Pandemic

When COVID-19 hit, the combined supply and demand shock was expected to lead to a dramatic collapse in trade. However, trade in goods bounced back quite rapidly, although trade in services still remains sluggish. Disruptions in key international networks of production and trade have also prompted calls to relocate that production domestically. In this context, this chapter finds that pandemic-specific factors had a key role in the rotation of demand from services to goods; and while there were significant negative spillover effects of pandemic containment policies on trade partners, these were short-lived, and trade and value chains proved resilient overall. However, to guard against future shocks, those international production and trade networks can be strengthened by increasing diversification, and enhancing substitutability, in input sourcing.

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