Healthcare Products Trade and External Shocks: The US-China Trade War and COVID-19 Pandemic

Abstract

In 2019 and the early months of 2020, global trade faced two major albeit very different shocks, namely the United States-China trade war and the cascading response of the countries around the world to the COVID-19 pandemic. While the former situation involved a pair of centrally-placed trading partners introducing tariffs and retaliatory measures across a broad swathe of tradeables that made a global trade environment highly unpredictable, the latter has seen entire production networks and supply value chains debilitated and transactions across the borders halted. This paper examines the trade impacts of these two external shocks from the perspective of the healthcare sector. The paper also analyses likely impacts of the trade tensions on the healthcare sector and the economy at large through secondary impacts on, for example, adoption rates of key technologies. We find that the trade war has led to an increase in tariffs that face several upstream inputs, such as active pharmaceutical ingredients, as well as technological components including those required for 5G adoption. While the COVID-19 policy responses based on the “Great Lockdown” have led to immediate short-term disruptions in the supply and trade of critical healthcare products, in the mid- and long-term, we posit that certain changes in consumption patterns may emerge in response and impact trade patterns. The paper draws attention to harmful effects of export restrictions and calls for a coordinated collective action in building back more robust and resilient ecosystems including in the healthcare sector.

Keywords: healthcare, trade, US-China trade war, tariffs, export ban, COVID-19, WTO, TRIPS, GATT, SPS, TBT, pharmaceuticals, PPE

JEL Classification: F14, I11, O33