The Effect of COVID-19 Policies on U.S. Trade Flows

Abstract

I examine whether the United States' trade flows have been impacted by COVID-19 policies set by its trading partners, using monthly trade flows data up to April 2020. I show, using indices that measure the intensity of COVID-related policies across countries over time, that the strength of COVID government policies in partner countries, driven wholly by containment and health policies, negatively impacts trade flows. I further disaggregate these indices into specific measures and show that these negative effects largely come from restrictions on work, public events, and leaving home. Policy impacts are stronger in within-commodity specifications, particularly for US exports. I then conduct additional analyses to determine whether commodities that are differentiated or require more face-to-face contact are more susceptible to these policy changes. The overall results suggest that lockdowns have had a dampening effect on trade.