Spatial transmission of the economic impacts of COVID-19 through international trade

While most of the attention to COVID-19 is being focused on the physical transmission of the virus across country borders, there is also an analogous spatial transmission of economic impacts through international trade and global supply chains. This paper presents an analysis of the extent to which the economic shocks of mandatory closures to mitigate the pandemic ripple through the world economy. We utilize a state-of-the-art computable general equilibrium (CGE) model to analyze these interconnections through international trade. We compare estimates of the impacts on US GDP in isolation and then examine the impacts taking into account US trade with China and the rest of the world (ROW). Our analysis indicates that these international trade linkage impacts are generally negative and range from near zero to very large overall, depending on the region, and that own- and cross-country impacts differ by region as well. At the same time, we find that China is able to capitalize on the situation by actually being able to increase its exports through international trade following mandatory closures in other regions. We also confirm that the US economy was relatively insulated from trade linkages with the rest of the world. Sectoral impacts provide further insight into the results.