COVID-19, Lockdowns and International Trade

The COVID-19 pandemics was the strongest negative shock faced by the global economy in many decades. Its impact on international trade flows was large, mostly due to the lockdowns aimed at curbing the spread of infections. The primary research question of the paper is the quantification of the heterogeneous impact of COVID-19 lockdowns and their stringency on trade flows along different firms’ characteristics and over time. The relevance of this question goes beyond the COVID-19 pandemic crisis. Shocks with similar characteristics may become more frequent, for example in connection with the effects of climate change.

The paper finds that for the period from January 2020 to June 2021, there is a strong impact of tighter foreign lockdowns on Portuguese exports, especially in the first half of 2020. The evidence also signals adaptability of Portuguese exporters to operate under adverse circumstances as of the second half of 2020 (Figure 1). 

In addition, the detrimental impact of lockdowns on exports increases with firm size (Figure 2) and with the geographical concentration of trade flows. The negative impact of stringent containment measures on trade is more pronounced for firms more involved in Global Value Chains and those that export more expensive goods. The same holds true for industries with high import content and for trade partners that are more important as sources of value added to be embodied in exports.

Click here to go to the paper by João Amador, Carlos Melo Gouveia and Ana Catarina Pimenta.

The opinions expressed are those of the authors and do not necessarily coincide with those of Banco de Portugal or the Eurosystem.