The Impact of COVID-19 on Exports: Decomposing the Demand and Supply Channels

We use transaction-level trade data to decompose the effect of COVID on exports into a demand and supply channel, respectively. An empirical challenge with this decomposition is that COVID-induced demand and supply shocks are intertwined, which makes it difficult to disentangle their respective impacts. We overcome this challenge by exploiting the geographic separation between export destinations and imported-input sources in our data to cleanly disentangle demand and supply shocks. We find that the reduction in exports in our sample in 2020 was primarily driven by export-demand shocks. Supply shocks played, at best, a second-order role. We show that the latter can be explained by firms switching their input purchases to the domestic market to minimize the adverse effect of COVID shocks in their supply chains.