The COVID-19 pandemic is now expected to trigger the worst economic downturn since the Great Depression. Many argue it could unravel globalisation altogether.
Globalisation relies on complex links – global value chains (GVCs) – that connect producers across multiple countries. These producers often use highly specialised intermediate goods, or “inputs”, produced by only one distant, overseas supplier. COVID-19 has severely disrupted these links.
Although the global economy was fragile at the start of 2020, many hoped for increased international trade following the US-China Phase One trade deal. COVID-19 has scuppered those hopes, bringing the world’s factories to a standstill and severely disrupting global supply chains.
China plays a key role in this. According to Chinese customs statistics, the value of Chinese exports in the first two months of 2020 fell by 17.2% year on year, while imports slowed by 4%.This drop in Chinese trade impacted some markets more than others. Comparative figures between the first two months of 2019 and the first two months of 2020 reveal a collapse in Chinese trade with the EU and US. Chinese exports to the EU fell by 29.9%, while imports from the EU declined by 18.9%. Exports to and imports from the US tumbled 27% and 8% respectively.
These substantial declines are likely related to the strong interdependence between European and US firms and Chinese ones.
