The relationship between

covid-19 and trade in the

USA

Section: 1

Course code and name:

Student Names:
20184965 … Jenan Abdulhadi
20191538 … Alanood Albalushi
202005221 … Masooma Sahrab
20181039 … Safeya Jaffar
20181701 … sumaya saeed
ECON440, international
economics
Instructor name: Dr.
Muhammed Abrar
Date of submission:
12/5/2022
Abstract

The value of global trade plummeted in 2020 but began to significantly recover the following
year (2021). Although total trade flows are now tranquilly above pre-pandemic levels, trade
effects among unambiguous items, administrations, and exchange partners are quite diverse,
creating stresses on unambiguous regions and supply chains. The COVID-19 pandemic
caused changes in the exchange structure in only one year that were comparable in scale to
changes that are typically witnessed over the course of four to five years. These changes were
brought about by the epidemic. Significant unbalanced features between exchange partners
and products remained as 2021 came to a close, and not all of the aggregated losses sustained
from earlier sharp declines were recovered. The heterogeneity of exchange effects and
changes exchange streams across items, sources, and objections results in high vulnerability
and change expenses, and it infers additional motivations for customers, firms, and state run
administrations to take on new risk moderation methodologies, or to increase existing risk
moderation methodologies.

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Introduction

The COVID-19 pandemic has affected the U.S. economy. Between January and July 2020,
the joblessness rate increased from 3.6% to 10.1%, modern creation fell by 9%, and nonfarm
business fell by more than 12.5 million individuals.
The Federal Reserve (Fed) and administrative and state legislatures have battled the
slump and the pandemic. Starting in March, the Fed brought down the government
supports rate focus by 150 premise focuses, gave forward direction that financing
costs would stay low, occupied with quantitative facilitating by purchasing Treasury
and home loan upheld protections, advanced to Treasury security essential sellers,
backstopped currency market reserves, empowered bank loaning, and found a way
alternate ways to keep up with the progression of credit.1 Congress passed a few bits
of regulation in March, including the Coronavirus Aid, Relief, and Economic Security
Act (CARES). Focuses gives advances on independent ventures to keep paying wages
(Paycheck Protection Program), grows joblessness benefits, pays USD 1200 for each
grown-up and USD 500 for every kid for people procuring up to USD 75,000 (or
USD 150,000 for citizens documenting together), and channels assets to the medical
services framework and state and neighborhood legislatures. A few states and regions
gave cover set up (S-I-P) orders commanding that unnecessary organizations close,
and those insignificant representatives telecommute. What are the instruments driving
the economy's reaction to the pandemic and strategy intercessions? Chetty et al.
(2020) utilized day-to-day information to analyze how spending, incomes, work, and
different factors are answered at the province and industry levels. Since the fall in
GDP somewhere in the range of 2019Q4 and 2020Q1 was driven by a drop in private
utilization consumption, they explored shopper spending. They announced that the
greater part of the drop in spending in June 2020 compared with June 2019 came from
the top pay quartile and just five percent of the drop came from the base quartile.
They tracked down that three-fourths of the drop in spending between the pre-Covid
period and the center of April came from labor and products requiring close contacts
like inns, transportation, and eatery suppers. They additionally observed that big-time
salary families diminished spending at organizations delivering nonfriables, making
these organizations lay off low-pay representatives. CARES installments then
animated spending by low-pay people yet did barely anything to increment work
among the many laid off from occupations requiring close contact. The Paycheck

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 Protection Program additionally did practically nothing to increment work among
these assistance laborers. Chetty et al. presumed that animating total interest and
giving liquidity to organizations may not increment work a lot while spending is
obliged by wellbeing concerns. The novel Covid or COVID-19 immensely affects the
economies around the world which are decimating in nature (Gao et al., 2021; Su et
al., 2021a). The infectious illness has restricted individuals to their homes which
thusly impacted the day-to-day working existence of the residents. Not at all like
different pandemics, it phenomenally affects the work market and shopper market.
Coronavirus, when announced pandemic on the twelfth walk 2020, after China and
South Korea, the US market experienced shocks in light of the spread of the pandemic
the nation over and the Oil market declined, which influence the economy going
lower and into the downturn (Su et al., 2021b). The COVID-19, joined with the oil
market emergency, is influencing the US economy, which is encountering financial
exchange unpredictability, joblessness, lower shopper certainty and utilization, and
lower Morden result. ‫ق‬comparative or surpassing in nature to the significant
emergencies in the US previously, i.e., the worldwide emergency in 2008, the Crash
of 1978, and the sorrow of 1929. Besides, the medical problem, which is more
essential to restrict individuals by presenting lockdowns, has brought about a large
number of Americans' employment misfortunes and livelihoods.
Likewise, the forcing of lockdowns across America impacts the general market totally,
equivalent to a downturn. Business analysts uncovered that monetary business sectors hopped
multiple times low and high in 25 days of March 2020 which is contrasted with awful
information on the lookout, other than that, the constriction in US GDP, expansion in costs of
everyday customer merchandise, a tremendous decrease in the modern creation alongside
administrations results, and low turnout of the stock trade is normal (Su et al., 2020b; Umar
et al., 2021b). Besides, joblessness is expanded quicker than the incredible monetary
emergency because of the monetary misfortunes. The work market and Morgan Stanley
conjecture that the joblessness in the worldwide emergency of 2008 went to 10 percent while
the joblessness rate in the pandemic can reach up to 12.8 percent, which is disturbing and can
influence the work market gravely. It is also expressed that 3.3 million specialists recorded
starting cases for protection to the public authority in the second last seven-day stretch of
March, which expanded from 0.2 million laborers earlier. Adding to the injury,
Unemployment and shopper utilization is at the lowest level while the greater part of the
residents and the employment misfortunes might lose their medical coverage.

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Literature review on COVID-19 and trade

The global pandemic has severely impacted multiple industries around the world, as entire
sectors of the economy have been shut down, resulting in severe disruptions to the supply of
goods and services. Mass layoffs and lost revenue have also significantly dented global
demand. Movement restrictions and physical distancing measures directly impact transport,
travel, and tourism – all industries directly linked to trade in services. Trade restrictions on
critical medical supplies and medicines, and possibly food, will further exacerbate the impact
on trade flows.

In the U.S., exports of goods and services fell by $141.5 billion, or 13.6 percent, in the first
five months of 2020, compared with the same period last year, while imports fell by $173.1
billion, or 13 percent. As a result, the trade deficit fell by $32 billion (12.2%). The industries
with the largest declines in exports were autos, parts, and engines (down $22.8 billion, or 33
percent); consumer staples ($19.2 billion or 21.9 percent); capital goods ($37 billion or 15.9
percent); travel services (333 billion, or 41 percent) and transportation services ($12.8 billion,
or 33 percent), while autos, parts, and engines also saw the largest declines (down $1 million,
or 30.9 percent) over the same period, at $49.1 billion or 30.9 percent); mobile phones and
Other goods such as household goods ($36.3 billion or 13.2%); capital goods ($28.0 billion
or 9.8%); travel services ($29.1 billion or 52.3%); and transportation services ($15.2 billion
or 33.6%) The decline is directly related to containment measures to control the spread of
COVID-19.

U.S. trade saw the largest decline in April 2020 (see Figure 12) as citizens were encouraged
to stay home and other measures were taken to slow the spread of COVID-19. The U.S.
economy began to shut down in mid-March and lasted until at least mid-May, as some states
began to slowly reopen their economies. (UNEMPLOYMENT INSURANCE WEEKLY, 2016)

n Compare with different examinations analyzing the effect of COVID-19 under various
circumstances. A few investigations, including one by the writers of this article, have zeroed
in on the effect of constrained closures and for the most part, tracked down an effect on GDP
of between 20-25% under conditions like what occurred (see del Rio-Chanona et al 2020;
Mandel and Veetil 2020; OECD 2020; Walmsley et al 2020). Dixor et al. (2020) analyze the
macroeconomic effect of COVID-19 on various drivers north of two years utilizing quarterly
CGE models. They gauge that at the lower part of the downturn toward the finish of the main
quarter of 2020, GDP would shrink by 19% and before the second quarter by 12%. They

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consider our working from home assessments, as well as government spending on medical
services and some balancing charge measures, for example, joblessness advantages and tax
reductions, all of which relieve the adverse consequence. The CBO (2020) gauges that
genuine GDP will shrink by 11% in the second quarter of this current year, inferring that
work will be almost 26 million less than in the final quarter of 2019. The U.S. will see an
annualized decrease in genuine GDP of up to 38% this year; be that as it may, given the
resuming, the general yearly decay is supposed to thin to 5.4%. Our outcomes lie between
these outrageous limits.

More understanding of the seriousness of COVID-19 in the U.S. can be acquired by

contrasting the effects anticipated here and those of other serious debacles. Zandi et al. (2017
assessments of the accompanying GDP impacts, which we changed over completely to 2019
bucks): 2012 Superstorm Sandy ($27.3 billion), 2005 Hurricane Katrina ($32.2 billion), 1995
Northridge Earthquake ($16.4 billion); and the 1993 Midwest flood ($12.3 billion).
Commentary 15 Regarding different calamities, Rose and Blomberg (2010) sum up five
examinations (counting their own) on the 2001 World Trade Centre assault The GDP sway is
between $70 billion and $136 billion. Most strikingly, our figure for the GDP sway even
surpasses that of the Great Recession. As indicated by Christian (2017), the Great Recession
had an expected GDP effect of $2.8 trillion in the five years paving the way for the
recuperation. Nonetheless, these figures incorporate the hosing offset impacts of
exceptionally amazing balances, and our figures overlook them. Nonetheless, in any event,
representing different upgrade bundles, our gauge for the cap may not dip under $2.8 trillion.

This audit uses state-of-the-art, statically achievable general harmony models to reproduce
three COVID-19 scenarios, ranging from truly protected epidemics to widespread epidemics.
Over the two years of the three scenarios, the net cost of COVID-19 to U.S. GDP is estimated
to be $3.2 trillion (14.8%) to $4.8 trillion (23.0%). Liability loss ratios ranged from 14.7% to
23.8%. Note that even as we change the power of remote work, the impact of continued
shutdowns is still huge.

In all three cases, the key factor driving the results was limiting the partial return of
termination and association. In all cases, these variables alone contributed to a 22.3% to
60.6% decline in U.S. GDP and a 23.3% to 58.4% decline in the labor force. The U.S. is
expected to have more impact on borrowing costs than China and the rest of the world
because 1) the U.S. economy

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has been hit by austerity, 2) the U.S. has been tightening for a bit longer, and 3) the U.S. has
more unnecessary jobs and articles.
The impact of individual tax evasion is indeed uncertain (Case 1) in the medium and
declining scenarios. Still, they have become critical and, in a more extreme case, would cause
a catastrophe of about $85 billion.
Suppression requests are the second most plausible part, offsetting roughly 30% of the
dreaded termination/reopening that leaves the three counties in a moderate and declining
scenario, and a whopping 60% to 85% of the adverse impact of the pandemic situation.

Applied Methodology
Citizens of the United States were hit with job losses and consequent loss of income as the
COVID-19 epidemic broke out in the early months of 2020 in the United States. Businesses
suffered a double blow: governments enforced lockdowns and a slew of laws, while the
general public avoided public spaces owing to health concerns, resulting in a drop in sales.
As a result, many Americans have lost their employment or are struggling to find work. The
graph below, courtesy of the US Census Bureau, shows that as a result of the epidemic, a far
smaller percentage of the US population was either totally or partially worked than in
previous years. The pandemic wiped out more than 10 years of steady employment growth in
the US population. (Ulanova).

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According to Forbes, the pandemic increased inflation rates and led to a 31.4 percent drop in
GDP growth. This is the lowest rate of GDP growth since the Great Depression. Furthermore,
unemployment reached its greatest level since World War II during the epidemic. (Patton).
These fluctuating statistics were highly worrying during the pandemic's peak, and they
indicate the pandemic's economic effect. The shifts indicate that the economy is
extraordinarily volatile, with unanticipated events having far-reaching consequences for the
country's economy.
In the haze of the pandemic's catastrophic health impacts and disastrous economic
consequences, companies moving to more distant and online techniques is a more positive
outcome. With more and more activities taking place in cyberspace, it is possible to argue
that doing business online may help rescue the US economy and be beneficial to many
modern sectors. Take, for example, the food sector. People are increasingly ordering meals
online through delivery services like Uber Eats and Door dash for a variety of reasons,
including health concerns and convenience. As a result, the more food firms consolidate their
web resources and build interfaces that encourage online buying, the more they open
themselves up to a new pool of clients. Businesses in a variety of industries will be able to
become more lucrative for themselves and the United States economy as a whole if they
become more in touch with current times.
The COVID-19 epidemic wreaked havoc on the US economy, rising unemployment rates and
slowing the country's GDP growth rate. Despite this, there is the confidence that in the next
years, new company methods and the new business environment will prove to be
tremendously successful for the US domestic economy.

Analysis of the project

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Figure.1 shows the export and import in the USA, and how it is changed thru the years, the
export of the USA is higher than the import, plus we can see that the export and import get
high and low together” they both decreased in Mar 2020 and started to increase in around
Jun
2020.

Table.1 shows the correlation coefficient between COVID-19 and the trade in the USA. The
results show that COVID-19 had a negative correlation with imports, Overall, it has been
affirmed from the correlation matrix that COVID-19 cases and deaths have acutely
influenced the imports and exports of the USA.

2008/9 2020

Peak to Month to Peak to bottom Months to

Bottom bottom bottom
World -20% 6 -19% 5
USA -24% 6 -31% 3
Japan -40% 6 -22% 5
Euro area -18% 7 -30% 2
Other AE -18% 9 -24% 2
China -27% 5 -14% 2
Emerging Asia (excl. China) -21% 6 -13% 5
Eastern Europe -21% 6 -9% 6
Latin America -15% 10 -26% 2
Africa and the middle east -13% 5 -17% 2
Table.2 Exports during the downturn (percentage change and duration of the collapse)

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 2008/9 2020

Peak to Month to Peak to bottom Months to

Bottom bottom bottom
World -19% 8 -1% 5
USA -24% 7 -16% 5
Japan -20% 5 -11% 2
Euro area -17% 10 -18% 3
Other AE -21% 10 -23% 3
China -26% 7 -10% 2
Emerging Asia (excl. China) -25% 7 -16% 5
Eastern Europe -42% 8 -15% 4
Latin America -28% 10 -28% 4
Africa and the middle east -15% 11 -5% 4
Table.3 Imports during the downturn (percentage change and duration of the collapse)

Tables 2 and 3 show a more thorough regional breakdown of exports and imports throughout
the slump period. The present downturn is shorter in duration than the global trade collapse of
2008/2009 for all national groups.

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Conclusion
To summarize the report, based on the empirical data that was gathered in addition to the
applied methodology. It is safe to assume that the US and global economies were severely
affected by the Covid-19 pandemic as seen by the significant drops in economic output and
stock market value.

Nonetheless, both the US and global economies rebounded from the damages that occurred in
the early days of the Covid-19 pandemic and experienced exponential growth that was
sustained from the middle of 2020 and upwards to early 2022 before the onset of the Russo-
Ukrainian war and fears of a global recession and energy crisis.

Furthermore, the pandemic has created ripples in societal and cultural norms that affected and
will continue to affect businesses such as the mass adoption of digital technologies such as
digital wallets and phone wallets like Apple Pay in addition to the shift from traditional
workplaces to a remote work from home model.

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Recommendation

Based on the statistical methodology applied by the team, in order to minimize disruptions
that have had occurred as a result of the pandemic. The government response should include
measures and controls to minimize disruptions to the economy through facilitating work from
home models and to maintain factories and the supply chains supporting the economy.

In addition, there is a social aspect that needs to be tackled. This includes implementing
lockdown measures in a way that minimizes job loss and inflation thus cross functional
policy teams need to be established akin to the covid-19 response team in the Kingdom of
Bahrain which was able to maintain lockdown measures through alternating between
lockdown and non-lockdown periods as well as wage subsidies to minimize job loss due to an
unfavorable economic environment.

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