covid-19

This article discusses the impact of Covid-19 on world trade. How businesses all around the world have been impacted with a focus on China.

The World has completely changed after the COVID-19 era started. Little did we knew, that the impact will be so drastic and dramatic and that the world will be totally different as we know it? COVID19 has impacted the way we live, the way we think, and the way we plan our future. A lot of industries worldwide have been affected. So it is fair to say that we are living in unprecedented times.

We will also discuss the challenges and opportunities that the COVID-19 has brought in the world of International Trade. We will see how it has affected international trade and using statistics one can understand the scale of the problem.

Table of Content

1) Covid-19 Impact on Trading Business

2) Macroeconomic Impacts in China and Globally

3) Covid-19 Impact on Trading Business – Expand Content

1) Covid-19 Impact on Trading Business

If we talk about International Trade and COVID-19, one country is unavoidable, China, the biggest exporter in the world. Chinese President Xi Jinping gave a televised address on February 23, 2020, giving his statement:

“It is unavoidable that the novel coronavirus epidemic will have a considerable impact on the economy and society”

This statement of the President of the largest exporting country in the world shows us that the impact of COVID-19 has to be felt by the world. It is unavoidable; however, some countries will be able to sustain this impact where others will be hit harder.

The Japanese Finance Minister Taro Aso in G20 summit on February 24, 2020, said:

“The spread of the new coronavirus is a public health crisis that could post a serious risk to the macroeconomy through the halt in production activities, interruptions of people’s movement and cut-off supply chains”

If we see the situation of various countries, due to not having a clear business future, many importers throughout the world are hesitant to invest their money.

during these times. There is a fear of what is going to happen next. Imagine if you invest in an inventory worth a million dollars but are unable to sell it as people worldwide have lost jobs hence the reduction in their purchasing power.

According to the report of World Bank Group on the topic “The Potential Impact of COVID-19 on GDP and Trade”, we can summarize the following key points:

    • There has been 3% labor underutilization across all sectors in the global economy.
    • The worldwide import and export trade cost increased by 25%. This is applied across all goods and services.

  • A sharp decline in international tourism impacted the trade as well. Tourists result in huge sales of local products.
  • The demand was moved away from sectors that require human interactions since the social distancing measures of COVID-19 were put in place.

2) Macroeconomic Impacts in China and Globally

      • The global pandemic is expected to reduce the Chinese GDP by 3.7% in 2020 whereas tourist-related activities declined by 29%. The real consumption of households declined by 7.2% in China, according to the report of the United Nations.
    • Global GDP expected to decline by 2.1% whereas the high-income countries’ GDP is estimated to decline by 1.9% and developing country’s GPD is expected to decline by 2.5%.
    • Overall exports at the global level are expected to decrease by 2.5%.

(Figure shows the GDP and Export implications of the global pandemic scenario in %.)

3) Covid-19 Impact on Trading Business – Expand Content

  • Increase in online business

There was a lot of increase in online business. A lot of people started working online due to the lockdown measures in many countries. The market went empty because of fewer buyers. Also, people are not willing to invest more money into buying products since they are reluctant about the future impact of the virus. Exhibitions and fairs started to be held online.

The Covid19 crisis has accelerated a huge expansion of e-commerce towards new firms, customers, and types of products. A lot of customers who would visit China for on-ground sourcing before the Covid19 pandemic were left with no choice but to hire agents or sourcing companies to help them with their sourcing needs. For this purpose, they had to go towards online sourcing rather than coming to China and visiting markets and then buying products.

  • Traveling becomes more difficult

One of the main effects COVID-19 has on international trading is that the shipping prices have increased a lot. Because of the large number of Airplanes being grounded, therefore the Cargo planes operating had to increase their prices which again lead to a decrease in imports and exports. Also, the amount of work that has to be put into sanitization and taking safety measures from COVID-19 in these planes have an immense impact on the shipping pricing.

Many passenger planes were also turned into cargo planes because there is not a lot of international passengers traveling going on. Images can be seen of Covid19 PPE items strapped on seats on passenger planes and delivered all around the world. This shows how much air travel has been reduced due to this pandemic.

When we talk about China, the borders to International flights were closed in March 2020 with some exceptions. There were some policies relaxed in September of 2020 but still many foreigners are unable to return back to China for their normal business operations.

  • New opportunities for trending products

The products which increased a lot in sales were the PPE products. The personal protection equipment for Covid-19. Millions of masks, gloves, protection suits, thermometers, face shields etc. were exported out of China. Many factories that were making other products shifted to manufacturing the PPE because these products were in high demand worldwide. This also helped the Chinese economy to grow back and become stable.

Masks like 3ply, KN95 and N95  were sold in millions all around the world. Almost every human on the planet needed one to protect themselves from the virus attack. Suppliers in the market provided feedback that things are tough and challenging during the pandemic but it has brought new opportunities. It is just a matter of finding the most trending product and start manufacturing and selling it.

Other products that increased during the Covid19 pandemic include household items, gym, and yoga products since people were unable to go to gyms, hand sanitizers, infrared thermometers to check temperature, clothing, and apparel, health and beauty, etc.

  • Globalization change suddenly

Over 50 countries (according to oecd.org) have changed port protocols, from closing various facilities on ports along with additional documentation requirements and examinations. A very important point to be noted is that when this pandemic started, there was a large number of shipping containers sitting in Chinese ports ready to be shipped, however, the restrictions on their movements lead to a huge rise in the price of containers.

The duties and taxes were also increased by many governments which slowed down the trading industry and also delayed the shipments.

Conclusion

In conclusion, we can say that Covid-19 has brought challenges and opportunities for the whole trading industry. Some product demand went down but others went up. Many factories that were making other products before went into manufacturing the PPE products. We are hopeful that this time shall pass soon and the trading industry will get back to its track soon.