The current Covid-19 outbreak is raising a number of growing concerns about the UK economy and its capacity to cope with the current situation and recover in the near future. One particular area of concern, in the UK and elsewhere, is related to international trade, i.e., trade of goods and services across countries. More specifically, the World Trade Organisation is currently expecting a fall in the value of international trade in 2020 roughly between 10% (optimistic scenario) and 30% (pessimistic scenario).
International trade is vital for the UK economy, as well as for other economies, in a number of dimensions such as international demand for domestic products, the availability of foreign products and inputs that are beneficial to both consumers and businesses, and the increasingly important global value chains. In this very moment, international trade in the UK and across the world is experiencing a strong slowdown that might be comparable, if not higher, in magnitude to the one observed in 2008-2009 during the Great Recession. Despite clear differences in the underlying nature of the economic shock and other aspects, we believe that what we learned from the 2008-2009 international trade collapse and subsequent swift recovery might be useful to help us understand the future implications of the current trade collapse.
World trade in manufactures fell by about 30% in nominal terms between the first quarter of 2008 and the second quarter of 2009;