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COVID-19 and trade: Simulated asymmetric loss

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  • Li, Chunding
  • Lin, Xin

Abstract

This paper uses 2018 data as a benchmark to build a numerical 26-country global general equilibrium model with trade cost and an endogenous trade imbalance structure. We assume that COVID-19 will increase the trade cost between countries and decrease labor supply in production. We use China’s trade data from January to April in 2020 to calibrate the influence level parameters and then simulate the trade effects of COVID-19 in China, the EU, the US, and the world. Our simulation results find that all countries’ trade and exports will be significantly hurt by the pandemic. Due to the trade diversion effect and the price growth effect, some countries will see an increase in import trade. Comparatively, the pandemic has the most negative impact on global trade, followed by the EU, the US, and China. As the pandemic deepens, the negative impact on trade will increase. The worldwide pandemic has the most significant impact on US trade, with an effect about 1.5 times that of the average world effect.

Suggested Citation

  • Li, Chunding & Lin, Xin, 2021. "COVID-19 and trade: Simulated asymmetric loss," Journal of Asian Economics, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:asieco:v:75:y:2021:i:c:s1049007821000567
    DOI: 10.1016/j.asieco.2021.101327
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    Cited by:

    1. Hancock, Mary Everett & Mora, Jesse, 2023. "The Impact of COVID-19 on Chinese trade and production: An empirical analysis of processing trade with Japan and the US," Journal of Asian Economics, Elsevier, vol. 86(C).
    2. Orhan Cengiz & Müge Manga, 2022. "Impact of COVID-19 pandemic on exports: new evidence from selected European Union countries and Turkey," Asia-Pacific Journal of Regional Science, Springer, vol. 6(3), pages 1195-1219, October.

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    More about this item

    Keywords

    COVID-19; General equilibrium; Trade effects; Simulation;
    All these keywords.

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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