Global Supply Chains In The Pandemic

Much of the world is closely integrated through final and intermediate goods trade. As countries simultaneously curtail economic activity by means of domestic lockdown policies, the global economic downturn may therefore be exacerbated by reductions in the supply of foreign intermediates, or demand for a country’s exports abroad. As a result, there is now a great deal of speculation in both policy circles and popular press that the experience of the pandemic will eventually lead to a “renationalization” of supply chains.1 However, it is an open question whether supply chain renationalization would make GDP more resilient to pandemic-type shocks. A shift from foreign to domestic intermediates would also change the structure of the domestic economy, and thus affect the reaction of the economy to a pandemic.

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