Description:
Two years after COVID-19 was first detected, countries continue to grapple with product shortages. In this paper, we explore the roots of these shortages through our examination of COVID as a disruption to global supply chains. We focus on China, one of the most influential actors in the global economy, and find that the shock has impacted China’s processing trade (foreign inputs and the exports using those inputs) more than its non-processing trade. We also find that the shock negatively affected Chinese exports more than its imports, and the effects have lasted well into 2021. Lastly, we find that the impact on processing goods depends on the partner country: for trade with Japan, intermediate imports experience the sharpest relative drop, but for trade with the United States, it is consumption exports that have the largest decrease. This implies that the effect depends on the part a country plays in the supply chain, with countries in the middle of the production chain being affected more by global shocks than other countries. Moving forward, these findings imply that firms will change their participation in global supply chains, and that governments might alter policy to prevent future supply chain issues