The U.S. Economy and the Global Pandemic

Chapter 3

The U.S. Economy and the

Global Pandemic

The COVID-19 pandemic has had repercussions for economies around the

globe. Although the U.S. economy suffered one of the sharpest contractions

in its history during 2020, the economic damage was even greater in many

foreign countries. Bolstered by an early and rapid vaccine rollout as well as

by strong fiscal support, the United States’ recovery has been robust, outpac-

ing that of most of our major trading partners in 2021. Inflation emerged as

a challenge for the United States and nearly all our major trading partners,

as strong demand, skewed toward goods and away from services, interacted

with the supply chain stresses described in detail in chapter 6 of this Report.

As a result of the rapid U.S. recovery relative to the rest of the world, the

U.S. trade deficit has widened. The strength of the U.S. recovery has led to

increased imports, as goods have flowed in from abroad to satisfy resurgent

demand from firms and consumers. Although exports have hit record

highs, they have increased at a slower pace than imports because many of

the countries that buy U.S. goods have not recovered as fast. At the same

time, new waves of infection depressed international travel and weighed on

the recovery of some services that are important for U.S. exports, such as

tourism.

The pandemic highlighted the need to tackle long-standing economic issues,

including those resulting from global economic integration. Due to a lack

of supportive public policy in the past, many American workers and com-

munities have borne the costs of shifting production around the world but

have not fully shared in its benefits, contributing to widening inequality.

98 | Chapter 3

Addressing these inadequacies requires policies that broaden the gains from

trade while leveling the international economic playing field by counter-

ing unfair trade practices and putting in place a more equitable global tax

system. Implementing such policy changes in a way that reduces uncertainty

and engages with the United States’ trade and commercial partners can

ensure that American consumers, workers, businesses, and investors benefit

from global trade.

The first section of this chapter places America’s economic experience dur-

ing the pandemic in the global context by comparing it with that of our larg-

est trading partners: the euro area, the United Kingdom, China, Canada, and

Mexico. The next section examines how international trade has recovered

from its sharp pandemic decline, discussing the causes of the widening U.S.

trade deficit and the effects of supply chain bottlenecks internationally on

traded inputs such as auto parts and capital goods. The last section discusses

how the Biden-Harris Administration is reorienting U.S. international eco-

nomic policy to mitigate rather than exacerbate economic inequality and to

level the international economic playing field.

Recovery Amid Global Economic Challenges

Placing the U.S. recovery from the COVID-19 pandemic in the global

context highlights how our robust fiscal support resulted in a faster return to

a strong economy. The backdrop to this demand-driven recovery, however,

was a tragic loss of human lives and higher inflation.

The Global Pandemic

The path of the global economy over the past year is best understood

in the context of the coronavirus pandemic. The starkest measure of the

pandemic’s effect is the number of deaths attributed to COVID-19. By

the end of 2021, reported deaths due to the virus had exceeded 5 million

people globally, including more than 827,000 in the United States (OWID

2021). The true global toll is probably much higher, because data collection

challenges outside the United States suggest that many other countries may

have substantially underreported deaths. For example, some estimates put

the true death toll in India alone in excess of 4 million (Anand, Sandefur,

The U.S. Economy and the Global Pandemic | 99

and Subramanian 2021). With deaths measured as a share of the population,

many of the hardest-hit countries have been middle-income countries in

Latin America and Eastern Europe (Johns Hopkins 2022).

Looking at total deaths can obscure the fact that different countries

have been hit by waves of differing severity at different times. Which coun-

try is faring worst at any point in time has varied significantly. Official data

show that the United States, the United Kingdom, and the euro area have all

had the highest recorded cases per capita at some point in time (figure 3-1).

Early in the pandemic, the United States led in per capita cases while the

United Kingdom led in deaths. In the second half of 2021, the reverse was

true. And the euro area reported the highest per capita cases in the spring

of 2021. This variation demonstrates how nearly all major economies have

been severely affected at some point during the pandemic.

Progress and timeliness in vaccinating populations have also varied

across countries. Both the United States and United Kingdom managed rapid

vaccine rollouts that made them early leaders in the share of the population

vaccinated (figure 3-2). Rollouts in Canada and the euro area accelerated

dramatically in the summer of 2021, and vaccination rates in both places

have since reached higher levels than in other major U.S. trading partners.

During the second half of 2021, vaccination rates in many middle-income

countries, such as Mexico, approached that of the United States, while rates

in low-income developing countries (not shown) remain substantially lower

(OWID 2021).

500

Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21

United States Canada

Euro area

United Kingdom Mexico China

Figure 3-1. International COVID Case Rates

Cases per million

2,500

2,000

1,500

1,000

Source: Our World in Data.

100 | Chapter 3

The United States’ Economic Recovery in the Global Context

The path of real gross domestic product (GDP) since the onset of the

COVID-19 pandemic provides the most basic measure of the virus’s eco-

nomic impact. The pandemic was accompanied by historic drops in output

in almost all major economies. U.S. GDP fell by 8.9 percent in the second

quarter of 2020 (figure 3-3), the largest single-quarter contraction in more

than 70 years (BEA 2021c). Most other major economies fared even worse.

The GDP of the United Kingdom in 2020:Q2 was 21.4 percent below its

average in 2019 (ONS 2022). In the euro area, output fell by more than 12.4

percent (Eurostat 2022c). Closer to home, Canada’s GDP was down 12.4

percent, while Mexico’s GDP fell by 19 percent (Statistics Canada 2022;

INEGI 2022).

The U.S. recovery has outpaced that of all its major trading partners

except China. By the second quarter of 2021, U.S. real GDP exceeded its

prepandemic level, ahead of most other major economies. Output growth

picked up in the euro area and Canada in the third quarter of 2021; but at

the end of 2021, output in most major U.S. trading partners had only just

reached its prepandemic level, while U.S output was 3 percent higher than

before the pandemic (see figure 3-3). Though many effects of the pandemic

are not captured by GDP, measured by this most basic indicator, the United

States’ recovery remained farther along than those of nearly all its peers.

The initial drop in real output in China was of a very similar magni-

tude to that of the United States (see figure 3-3), but the initial recovery

was even faster. By the third quarter of 2020, China’s real GDP had not

only exceeded its prepandemic level but was also above what would have

Jan. 1, 2021 April 1, 2021 July 1, 2021

Canada

Euro area

Oct. 1, 2021

United Kingdom

Mexico

Figure 3-2. International COVID Vaccination Rates

Percent fully vaccinated

100

Source: Our World in Data.

Note: “Fully vaccinated” is defined as having received all doses prescribed by the initial vaccination

protocol. China does not report statistics on the share of its population that is fully vaccinated.

United States

The U.S. Economy and the Global Pandemic | 101

been expected based on its prepandemic trend. The Chinese government

did extend substantial support, primarily through infrastructure spending.

However, exports have been a key driver of China’s recovery, climbing to

more than 40 percent above their prepandemic level by the fourth quarter of

2021 (GACC 2021). As a result, the contribution of net exports to China’s

real GDP growth reached nearly 30 percent in 2020, its highest level in

more than 20 years (CNBS 2021a). In this way, China has benefited from

the pandemic-induced pivot of global consumption away from services and

toward goods, many of which are manufactured in China. Despite continu-

ing support from strong demand for its exports, output growth in China

slowed in the second half of 2021 as government support for the economy

was withdrawn (CNBS 2021b).

Future research by economists will fully assess what enabled some

economies to weather the pandemic shock better or to bounce back more

quickly. Based on what we know now, there are two areas of policy where

the U.S. response stands out. The first is the speed of our vaccine rollout,

discussed above. The fact that more than 40 percent of the U.S. population

was fully vaccinated by May 2021, when vaccination rates in most European

countries were still less than half that, gave our economic rebound an impor-

tant head start.

The other area where the United States stands apart is fiscal policy,

suggesting that this also played a role in accelerating the recovery beyond

those of most of our trading partners. U.S. Federal Government spending to

directly support firms and workers, as well as State and local governments,

Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21

Canada

Euro area

United Kingdom Mexico China

Figure 3-3. Real GDP by Country

120

110

100

United States

Sources: National data organizations.

Note: Data are seasonally adjusted.

Index level: 2019:Q4 = 100

102 | Chapter 3

was substantially larger than comparable efforts in other major economies

(figure 3-4). As of the third quarter of 2021, the cumulative U.S. discretion-

ary fiscal response (including not only additional spending but also revenue

forgone due to discretionary tax cuts) exceeded 25 percent of GDP. By

comparison, the U.K. response was under 20 percent of GDP, and average

spending in the euro area was 12 percent of GDP. The scale here helped to

ensure that, by the end of 2021, U.S. consumption had returned to its precri-

sis trend, while in the euro area, for example, consumption remained below

its precrisis level (Boone 2021).

The Challenge of Inflation

Inflation has proved a serious challenge for many countries during the

recovery. In the 12-month period ending December 2021, headline con-

sumer price inflation in the euro area was 5.0 percent, well above its average

of about 1 percent in the five years before the pandemic (Eurostat 2022a), as

shown in figure 3-5. Canada and the United Kingdom have also seen sub-

stantially higher inflation than was the case before 2020. Inflation has also

risen here; indeed, U.S. inflation has run higher than that of most of its major

trading partners, although the gap narrowed in the second half of 2021.

The fact that inflation has accelerated in so many countries under-

scores its common drivers. Pandemic-induced changes in behavior led to

relatively more demand for goods than services. In many countries, the

balance of consumption remained unusually tilted toward goods throughout

2021, so demand for goods grew substantially faster than would have been

the case in a normal recovery (Bruce 2021; Boone 2022). As a result, the

world’s economic recovery put stress on the already-vulnerable global

Figure 3-4. Discretionary Fiscal Response, 2020:Q1–2021:Q3

Percentage of 2020 GDP

Source: International Monetary Fund.

The U.S. Economy and the Global Pandemic | 103

supply chains for consumer goods, as discussed further in chapter 6 of this

Report. This phenomenon of recovering demand for goods interacting with

supply constraints can help to explain the relatively higher inflation in the

United States, where the recovery was relatively stronger. Looking across

countries, inflation was higher where the gap between the real GDP and its

prepandemic level—a main measure of progress toward economic recov-

ery—was smaller (figure 3-6).

Rising prices for motor vehicles were a key driver of U.S. inflation,

with prices of new cars nearly 12 percent higher at the end of 2021 than they

were a year earlier. Prices of used cars jumped by almost 40 percent during

the year (BLS 2022b). Though other countries also saw higher car prices,

their rise was not as dramatic. Indeed, the CEA calculates that consumer

prices, excluding those of new and used cars, rose by similar magnitudes in

the euro area (4.7 percent), for example, as in the United States (5.1 percent).

Globally, factors pushing up car prices included rebounding demand

and a shortage of semiconductors (Gross, Miller, and Inagaki 2021). Car

manufacturers both in the United States and abroad have faced produc-

tion challenges due the semiconductor shortage, but during 2021, U.S.

auto production outpaced that of many peers. At the end of 2021, U.S.

auto production stood at just under 5 percent below its prepandemic level,

ahead of the recovery of German, French, and Japanese production (Federal

Reserve Board 2022; Eurostat 2022b; METI 2021). Thus, the greater rise

in U.S. prices came in spite of a faster recovery in production. The fact

that the rise in car prices has been larger here than abroad stems partly

from the particularly resilient demand created by the U.S. recovery passing

Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21

Figure 3-5. Consumer Price Level

Index level: Dec. 2019 = 100

115

110

105

100

United States Canada Euro area United Kingdom Mexico China

Sources: National data organizations.

Note: Data are seasonally adjusted.

104 | Chapter 3

through to the auto sector—real consumer spending on new motor vehicles

rose 16 percent in 2021, a level reaching 18 percent above its prepandemic

level (BEA 2022b). Though higher vehicle prices do pose challenges for

American households and businesses, the strength of the recovery in the

U.S. auto sector relative to other major auto-producing countries highlights

the important benefits of the U.S. demand-driven recovery for workers and

businesses. (See box 3-1.)

International Trade, the Economic Recovery,

and Lingering COVID-19 Challenges

In 2021, international trade broadly recovered from the sharp decline that

followed the onset of the COVID-19 pandemic, with U.S. exports and

imports of goods exceeding prepandemic records. Import growth outpaced

export growth, widening the U.S. trade deficit. Though trade in goods

broadly recovered in 2021, supply bottlenecks slowed the recovery of both

imports and exports of such products as automotive and capital goods that

are at the heart of the global value chains that were disrupted by pandemic-

related challenges.

In contrast, waves of COVID-19 infections have weighed down the

recovery of cross-border trade in services. Although trade in services that

are less reliant on personal contact followed a recovery pattern similar to

Brazil

Canada

China

Malaysia

Senegal

United States

–2.0

0.0

2.0

4.0

6.0

90 95 110 115

Figure 3-6. Recovery in Output and Inflation

Annualized CPI growth, Feb. 2020–Sep. 2021

8.0

100 105

2021:Q3 real GDP (as % of 2019:Q4 GDP)

Sources: National data organizations.

Note: CPI = Consumer Price Index. Data are seasonally adjusted, except for Senegal’s CPI.

The U.S. Economy and the Global Pandemic | 105

Box 3-1. Lessons from Abroad for Labor Market Policy

By some measures, the U.S. labor market appears to have recovered rap-

idly. America’s unemployment rate jumped at the onset of the pandemic,

but then fell steadily, and by the fourth quarter of 2021 was once again

lower than in the euro area, Canada, or the United Kingdom (figure 3-i).

However, though the number of people employed at the end of 2021 was

above its prepandemic level in most of our trading partners, this is not

true here (figure 3-ii). The reason: though labor force participation has

increased significantly over the past year, relatively more people left the

U.S. labor force early during the pandemic than in many other countries.

The discretionary fiscal response in the United States was larger

than that of most of our trading partners when considering the three

major pieces of fiscal legislation passed over the course of the pandemic,

and the government support associated with that response was delivered

to individuals and households in a very different way. As discussed

in chapter 2, pandemic support payments were generally received in

the form of unemployment insurance or as direct payments. By con-

trast, governments in the euro area and the United Kingdom adopted

or strengthened existing job retention programs, which subsidized

employed workers’ incomes. (OECD 2020).

These programs come in two forms: short-time work programs, in

which the government pays employees for hours not worked; and wage

subsidies, in which the government either subsidizes pay for hours the

employee actually works or raises employees’ pay to a minimum level,

regardless of time worked. These programs help explain why unemploy-

ment rates increased remarkably little in the euro area and the United

Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21

United States Canada Euro area United Kingdom Mexico China

Figure 3-i. Unemployment Rates

Percent

Sources: National data organizations; OECD.

Note: Data are seasonally adjusted, except China. The United States measures age 16 and above, Canada

measures age 15+, and China measures urban area unemployment. Other metrics are total unemployment.

106 | Chapter 3

Kingdom, both in absolute terms and relative to the change in the U.S.

unemployment rate. By design, job retention programs ensured that

many people working few or no hours remained on the payroll, receiving

paychecks from their employer that were almost entirely government

funded (OECD 2020).

The difference between the U.S. approach and these job retention

programs may seem semantic: workers were on the job dramatically less

in the spring and summer of 2020, whether or not they were technically

employed, and the magnitude of the drop was similar in the United States

and other major economies. However, in the United States, workers were

formally separated from their jobs and became unemployed (Boissay

et al. 2021). Unemployed workers leave the labor force (meaning they

stop looking for a job) at a rate almost 10 times greater than employed

workers, who exit the labor force if they leave their job and do not try

to find a new one (for details of what constitutes being in the labor

force, see BLS 2014). Once they leave the labor force, workers tend to

stay out (Hobijn and Şahin 2021). As the U.S. economy has recovered,

unemployed workers have found jobs and the unemployment rate has

fallen quickly. But unlike countries that adopted job retention programs,

in the United States there are also more workers who are no longer in the

labor force—meaning that they are neither working nor actively trying to

find a job; and this slows the rebound in the number of people employed

(BLS 2022a; CRS 2021).

Since 2012, the United States has had a job retention program—the

Short-Time Compensation Program—similar to efforts adopted else-

Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21

Oct-21

United States Canada Euro area United Kingdom Mexico

Figure 3-ii. International Employment

105

100

Sources: National data organizations.

Note: Employment metrics vary slightly by source. The United States measures 16 years and above, Canada measures

15 years and above, and the United Kingdom measures a three-month rolling average for employment 16 years and

above. The euro area and Mexico measure total employment. All data are seasonally adjusted, except for Mexico.

Index level: 2019:Q4 = 100

The U.S. Economy and the Global Pandemic | 107

goods, others—particularly travel and transportation services

—continue to

be impaired by the persistence of the virus. The sharp contraction of trade in

travel services was a notable drag on the U.S. trade balance in 2021. Exports

of these services in the form of foreign tourists, students, and business trav-

elers are typically a significant contributor to the surplus in the U.S. trade

balance in services.

The U.S. Trade Balance

The strong domestic demand for goods that has characterized the economic

recovery in 2021 is reflected in the deepening deficit of the U.S. trade

balance—defined as the difference between the total value of goods and ser-

vices that U.S. residents buy from abroad and the value of all the U.S. goods

and services sold abroad (BEA 2022a). At 4 percent of GDP, the 2021 trade

deficit is the largest since 2008 (measured as a share of GDP) (figure 3-7).

Deeper trade deficits in the United States over the past two decades have

been correlated with economic growth because they reflect strong demand;

2021 was no exception (BEA 2022b).

Over the past 20 years, the United States has typically maintained a

deficit in goods trade that is partially offset by a surplus in services trade.

The higher overall trade deficit in 2021 reflected a larger goods trade deficit

and a smaller services trade surplus relative to recent years. In particular,

the increase in the goods and services trade deficit from 2.8 percent of GDP

in 2019 to 4.0 percent in 2021 reflects a 0.5-percentage-point reduction in

the services surplus and a 0.7 percentage point increase in the goods trade

deficit (figure 3-7). Although both developments can be traced to challenges

stemming from COVID-19, the reasons for these outcomes are distinct.

In official U.S. data on services trade, this category is named “transport” rather than

“transportation.”

where during the pandemic. Twenty-six States, which are home to 70

percent of the U.S. labor force, have active versions of the Short-Time

Compensation Program. However, participation in these local programs

is very low, in part due to the associated administrative burdens (Von

Wachter 2020). Viewed in light of the data on transitions in and out

of the labor force discussed above, the trajectory of U.S. employment

during 2021 suggests that reforms aimed at expanding participation in

this program could ensure a speedier labor market recovery after future

downturns. That said, in considering this policy option, a very important

open question is how European-style job retention programs are affect-

ing the reallocation of workers across types of jobs during the economic

recovery.

108 | Chapter 3

The increases in consumption and investment expenditures that drove

strong economic growth in 2021 entailed greater expenditures on both

domestically produced and imported goods and services. American pro-

ducers of goods, challenged by pandemic-induced labor and input supply

obstacles, strained to keep pace with surging domestic demand for goods,

which reduced the available supply for exports (Furman and Powell 2021).

The dampening of growth in exports of U.S. goods was amplified by the

fact that America’s fiscal policy response was larger than most other major

economies (see figure 3-4). Though demand here exceeded its prepandemic

trend, demand abroad lagged. As a result, American firms and consumers

stepped up purchases of imported goods to a greater degree than their for-

eign counterparts, widening the U.S. trade deficit in goods (Milesi-Ferretti

2021). Also contributing to the widening goods trade deficit was the shift

in the balance of trade in oil and petroleum products from surplus to deficit,

which is discussed in box 3-2. Further, restrictions on foreign nationals

entering the United States and rising costs of maritime freight transportation,

a service that is primarily provided by foreign-owned firms, brought down

the surplus in services trade (BEA 2022a).

Macroeconomic developments here and abroad have contributed to the

widening trade deficit through another channel: exchange rate movements.

As the COVID-19 virus spread in early 2020, the U.S. dollar appreciated

9.7 percent from January to late March, reflecting the dollar’s status as a

safe asset (figure 3-8). In times of heightened economic uncertainty, inves-

tors around the world purchase dollar assets, which they view as a reliable

store of value (Jiang, Krishnamurthy, and Lustig 2021). From the end

of March 2020 through the end of 2020, the dollar depreciated as global

–7.0

–6.0

–5.0

–4.0

–3.0

–2.0

–1.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Services Goods Total

Figure 3-7. U.S. Trade Balance, 2001–21

Percentage of GDP

2.0

1.0

0.0

Source: Bureau of Economic Analysis.

The U.S. Economy and the Global Pandemic | 109

Box 3-2. Trade in Oil and Petroleum Products

The United States is the world’s largest oil producer, and both an impor-

tant exporter and a major importer of petroleum products (EIA 2021a).

These products constitute more than 10 percent of U.S. exports and about

7 percent of U.S. imports. Prices of oil and gas rose significantly during

the first 10 months of 2021, with West Texas Intermediate Crude prices

finishing the year more than 55 percent above its end-2020 level (EIA

2022) and global natural gas prices increasing almost sixfold between

November 2019 and November 2021 (IMF 2021). Higher prices, along

with rising volumes of imports and exports, meant that the dollar values

of U.S. petroleum products exports were almost 50 percent above their

2020 level, while imports were up more than 75 percent (figure 3-iii).

Foreign and domestic factors drove the rise in energy prices in

2021. In China, overall supply was constrained by ambitious government

efforts to rein in the burning of coal while manufacturing establishments’

energy demand jumped as production surged (Riordan 2021). As a

result, natural gas prices in Europe and Asia jumped due to the higher

Chinese demand for natural gas as a substitute for coal. Also pushing

up global energy prices was the OPEC+ (Organization of the Petroleum

Exporting Countries Plus) group of oil producers’ reluctance to more

rapidly expand oil production (Lawler, Ghaddar, and Astakhova 2021),

which they had cut by 10 million barrels per day (about 10 percent of

global production) in 2020 in response to the pandemic-induced drop

in demand (EIA 2020). In the United States, weak investments in new

energy sources during 2020 weighed on energy supply as the economy

recovered in 2021 (IEA 2021). Additionally, bad weather, including an

unusually cold winter in Texas and hurricanes Ida and Nicholas in the

–10

–5

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

Jul-21

Oct-21

Balance Exports Imports

Source: Census Bureau.

Note: Data are seasonally adjusted.

Figure 3-iii. Trade in Petroleum Products

Dollars (billions)

110 | Chapter 3

financial conditions began to normalize and the earlier flight to safety was

reversed. That depreciation also reflected the very aggressive action of the

Federal Reserve to support the U.S. economy by keeping interest rates low

(Economist 2021). This benefits American businesses and households that

borrow to purchase equipment or homes, but it makes U.S. financial assets

less attractive to global investors. Lower foreign demand for U.S. assets, in

turn, resulted in dollar depreciation from April through December 2020, as

seen in figure 3-8.

In 2021, the dollar resumed appreciating and ended the year up 3.6

percent against the currencies of its major trading partners, as measured by a

Federal Reserve Board index (figure 3-8). Expectations were that the Federal

Reserve would begin to tighten policy earlier than other central banks, and

that contributed to the rise in the dollar’s value (Rovnick, Rennison, and

Platt 2021). Such expectations reflected two aspects of America’s macro-

economic performance relative to our trading partners: the more rapid recov-

ery in U.S. output, and the relatively larger rise in inflation. A strengthening

Gulf of Mexico, also affected America’s oil production (EIA 2021b,

2021c).

On the demand side, the widespread availability of vaccines start-

ing in the spring of 2021 meant the resumption of travel and some com-

muting, pushing up gasoline demand (EIA 2021d). Pandemic-induced

shifts in the modes of transportation used for travel and commuting

further boosted gasoline demand, as many opted to drive rather than use

mass transit or travel by plane (Bair, Guerra Luz, and Bradham 2021).

100

105

Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21

Figure 3-8. Nominal Broad Dollar Index

Index level: Jan. 2, 2020 = 100

110

↑ Dollar appreciation

Source: Federal Reserve Board.

The U.S. Economy and the Global Pandemic | 111

dollar tends to widen the trade deficit by making imported goods cheaper

for American consumers, which boosts imports, and U.S. exports become

more expensive for foreign buyers, depressing exports (Gruber, McCallum,

and Vigfusson 2016).

International Trade in Goods

U.S. trade in goods rebounded relatively quickly after the sharp drop at the

onset of the COVID-19 pandemic in 2020, and continued to rise through

2021. Both exports and imports of goods broke nominal records set in 2018.

Goods imports breached record levels in real terms as well. This swift and

robust rebound stands in sharp contrast to the stagnation in trade that fol-

lowed the Great Recession, beginning in 2008 (figure 3-9). From the start of

the Great Recession, goods exports did not recover from their precrisis peak

for more than two years, and goods imports did not systematically rise above

their precrisis peak for nearly 10 years.

As discussed in the previous section, 2021 growth in imports generally

outpaced that of exports. This has been true throughout the economic recov-

ery. Even though goods imports had fully recovered in real terms to pre-

pandemic levels by November 2020, U.S. exports did not achieve that feat

until more than a year later, in October 2021 (Census Bureau 2022b). The

faster recovery of imports relative to exports is a direct consequence of the

broader macroeconomic context discussed earlier in this chapter. However,

the effects of pandemic-related disruptions inhibited export recovery for

some products more than others.

Figure 3-9. U.S. Trade in Goods

Dollars (billions)

300

250

200

150

100

Imports

Exports

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: Census Bureau.

Note: Data are seasonally adjusted.

112 | Chapter 3

In real terms, U.S. exports of food, feed, and beverages were little

affected and exceeded their February 2020 levels for most of the second half

of that year. U.S. exports of consumer goods surpassed their prepandemic

level in November 2020 (figure 3-10).

By contrast, exports of capital goods

did not exceed their prepandemic value until April 2021, and remained at

about that level for the rest of the year. Exports of autos and parts were more

than 10 percent below their prepandemic level for most of the year.

The relatively swift rebound in exports of consumer goods highlights

the global nature of the pandemic-induced switch from services to goods

consumption. The softer performance of capital goods and auto exports

reflects the flip side of the strong demand unleashed by the economic recov-

ery. Supply challenges for critical inputs disrupted the global value chains

that characterize production in the automotive and other capital goods indus-

tries, inhibiting their ability to meet surging domestic and foreign demand

(see chapter 6 for a full discussion of supply chain challenges). The final

goods produced and exported by American businesses in these industries

are complex. Automotive exports often rely on semiconductors, the global

supply of which was notably stressed in 2021 (McKinsey & Company 2021;

Ewing and Boudette 2021). Civilian aircraft, engines, and parts represented

the largest share of the decline in exports of capital goods relative to 2019,

reflecting diminished demand by airlines after COVID-19 dramatically

reduced air traffic (Census Bureau 2022a; Kuzmanovic and Rassineux n.d.).

The BEA end-use category “food, feed, and beverages” consists of agricultural commodities,

including those used for animal feed, as well as fish and shellfish, prepared foods, and alcoholic and

nonalcoholic beverages.

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

Jul-21

Oct-21

Consumer goods Automotive goods Food, feed, and beverage goods

Figure 3-10. Real Exports, Selected End-Use Categories

Index level: Feb. 2020 = 100

140

120

100

Capital goods

Source: Census Bureau.

Note: Data are seasonally adjusted.

The U.S. Economy and the Global Pandemic | 113

The composition of U.S. imports growth in 2021 highlights the

strength with which U.S. demand has recovered and the challenges econo-

mies around the world continue to face. U.S. goods imports dipped across

the board during the initial months of the pandemic, but to a lesser extent

than exports, and then rapidly exceeded their pre-COVID-19 level (figure

3-11). Consistent with the increased consumption of goods relative to ser-

vices, imports of consumer goods showed a striking increase in 2021, rising

to 16.6 percent above their 2019 level. Imports of capital goods, such as

machinery used in factories, also rose notably in 2021, to 11.3 percent in

real terms above their 2019 level, as domestic American firms expanded to

satisfy booming U.S. demand.

The trajectory of automotive imports illustrates the global nature of

the supply chain stresses that emerged during 2021. Though automotive

imports initially rebounded, they subsequently declined as global supply

chains were disrupted (Ewing and Boudette 2021). Imports in this category

were 9.6 percent below their 2019 level in 2021. This category includes both

motor vehicles and parts, but the decline was entirely due to falling imports

of finished vehicles, while parts were slightly above their 2019 level (Census

Bureau 2022a). As discussed previously in this chapter, the recovery of the

U.S. automotive sector outpaced that of other major auto-manufacturing

countries in 2021.

International Trade in Services

In contrast to the relatively swift recovery of trade in goods, the exigencies

of containing the spread of COVID-19 continue to suppress global demand

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

Jul-21

Oct-21

Capital goods Consumer goods Automotive goods Food, feed, and beverage goods

Figure 3-11. Real Imports, Selected End-Use Categories

Index level: Feb. 2020 = 100

Source: Census Bureau.

Note: Data are seasonally adjusted.

160

140

120

100

114 | Chapter 3

for services. The overall decline in both exports and imports of services at

the onset of the pandemic (figure 3-12) is primarily due to a steep drop in

trade in travel services (figure 3-13). Total exports and imports of services

other than travel and transportation services—which covers finance, insur-

ance, maintenance, construction, information, personal and government

services, intellectual property, and other services—exceeded their 2019

value in 2021.

Figure 3-13 illustrates that neither imports nor exports of travel ser-

vices have approached their prepandemic levels. However, while imports

of travel services have increased relatively steadily since the pandemic first

hit the United States, exports saw only a minimal increase until November

2021, when the Biden-Harris Administration eased travel restrictions that

had prevented many foreign tourists, students, and business travelers from

traveling to the United States, resuming revenue from travel exports (White

House 2021c).

By contrast, most other countries were open to U.S. travelers

for much of 2021 (Schengen Visa Info 2021; Ponczuk 2021).

Trade in transportation services has likewise been shaped by the

exigencies of the pandemic and economic recovery. The dramatic increase

in the deficit for the transportation services balance depicted in figure 3-14

directly reflects the challenges faced by shippers of goods in 2021. The rise

in maritime freight services imports largely drove the increased value of

imported transportation services (BEA 2022a). The skyrocketing cost of

moving goods from abroad to the United States meant that U.S. importers

paid dramatically more to shipping companies (Harper Petersen 2022).

Exports of travel services include goods and services acquired by foreign visitors, including foreign

students, while visiting the United States. Similarly, imports of travel services cover goods and

services acquired by U.S. residents visiting foreign countries.

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

Jul-21

Oct-21

Balance Exports Imports

Figure 3-12. Trade in Services

Dollars (billions)

Source: Bureau of Economic Analysis.

Note: Data are seasonally adjusted.

The U.S. Economy and the Global Pandemic | 115

Because nearly all major shipping firms are foreign-owned (Marine Digital

2021), these costs register as U.S. service imports. In contrast, U.S. exports

of transportation services are dominated by passenger air transportation,

which, like travel services, were suppressed by restrictions on foreign travel

to the United States until the end of 2021 (BEA 2022a).

Categories of services that saw a robust recovery included finance and

insurance trade and other business services imports. Because they do not

rely as heavily on in-person interaction, both imports and exports increased

-2

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

Jul-21

Oct-21

Figure 3-13. Trade in Travel Services

Dollars (billions)

Exports

Imports

Source: Bureau of Economic Analysis.

Note: Data are seasonally adjusted.

–6

–4

–2

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Oct-20

Jan-21

Apr-21

Jul-21

Oct-21

Exports

Imports

Source: Bureau of Economic Analysis.

Note: Data are seasonally adjusted. In official U.S. data on services trade, this category is named “transport”

rather than “transportation.”

Figure 3-14. Trade in Transportation Services

Dollars (billions)

116 | Chapter 3

year-on-year relative to their 2019 levels throughout the pandemic and

recovery. Similarly, trade in intellectual property, telecommunications, and

other business services recovered quickly and is now above 2019 levels.

Policies to Build an Equitable International Economy

U.S. participation in the global economy has yielded important benefits,

including lower prices for consumers, lower costs for American manufac-

turing inputs, and access to a greater variety of products as well as larger

markets for American-made goods and services. However, global economic

integration has also increased the exposure of American businesses and their

workforces to import competition, which has meant loss of livelihoods for

some American workers, thus contributing to the troubling rise in inequality

documented in chapter 1 of this Report (Clausing 2019; Autor, Dorn, and

Hanson 2013, 2016, 2021). Other factors have also pushed up inequal-

ity, ranging from the declining progressivity of the tax system (Antràs,

de Gortari, and Itskhoki 2017) to increased automation in manufacturing

production (Moll, Rachel, and Restrepo 2021). Nonetheless, the effects of

U.S. international trade and investment policies on American workers and

communities, and thus on economic inequality, have also played a role.

The COVID-19 pandemic provided an opportunity to refocus domestic

and international policies to alleviate the disruptions that participation in the

global economy can inflict on American workers and increase the opportu-

nities that it can offer them. This means seeking a better balance between,

on one hand, reducing costs for American businesses and lowering prices

for consumer products and, on the other hand, ensuring that workers whose

livelihoods are at risk from global competition are not disproportionately

harmed. Ensuring that U.S. participation in the global economy supports

the Biden-Harris Administration’s goal of a more equitable economy at

home also requires policies that level the international economic playing

field by improving labor standards abroad, confronting unfair practices by

our trading partners, and making the international tax system fairer. Trade

policy can also support another fundamental policy goal, the reduction in

greenhouse gas emissions; box 3-3 describes how this can be accomplished.

Broadening the Gains from Trade

The uneven effects of the COVID-19 pandemic demonstrated inequali-

ties within American society, showcasing how negative economic shocks

can be disproportionately concentrated among individuals who are more

economically vulnerable.

Similarly, the job and income losses that have

accompanied rising import competition have often fallen disproportionately

See, e.g., Mongey et al. 2021; Chetty et al. 2020; Liu and May 2020; and Hardy and Logan 2020.

The U.S. Economy and the Global Pandemic | 117

on low-skilled workers, exacerbating inequality (Clausing 2019). A large

body of economic research focused on the effects of the dramatic increase

in import competition from China in the early 2000s, the so-called China

Shock, has demonstrated that, though the gains from international trade

have been substantial, the costs have outweighed these gains for some U.S.

communities. Increased import competition from China has had adverse

effects on employment and incomes in labor markets that are more exposed

Box 3-3. Greenhouse Gas Emissions and Trade

As an example of how trade policy can support a broader set of goals,

consider international trade policy oriented toward incentivizing the

reduction of greenhouse gas emissions. Effectively combating climate

change requires policies that reduce global emissions of greenhouse

gases and increase resilience to the climate changes that have already

happened. However, those very policies can put domestic production at

a competitive disadvantage relative to production in countries with less

stringent mitigation policies (Dechezlepretre and Sato 2017). Further,

local policies that reduce emissions by producers in one country are

ineffective—from a global perspective—if their primary effect is to shift

emissions elsewhere.

To create a level playing field in domestic markets with strong cli-

mate policies and ensure maximal decarbonization from those policies,

scholars and policymakers have suggested introducing trade rules based

on the carbon content of traded goods and services. Such a policy could,

for example, impose a carbon fee on goods imported from countries with

less ambitious climate policies that offsets the climate regulatory costs

that producers face in the domestic market. Research suggests that these

policies can help accelerate decarbonization globally and protect the

domestic industry in the countries enacting them (Campbell, McDarris,

and Pizer 2021). For example, the United States and European Union

reached an agreement in late 2021 to negotiate a global arrangement

for trade in steel and aluminum that takes the carbon intensity of these

industries into account and that aims to drive industrial decarbonization

around the globe (White House 2021b).

These emissions-based trade policies need not favor any one

mechanism for incentivizing decarbonization, recognizing that domestic

mitigation policies can take many forms—from regulations to tax

incentives to a carbon price. Instead, these trade tools can retain the

flexibility for countries to enact a range of climate policy tools, as long

as emissions are decreasing. As discussed in chapter 7 of this Report,

policies that encourage domestic industries to shift toward clean energy

could, for example, take the form of regulations, tax incentives, and other

similar provisions.

118 | Chapter 3

to competition from China, and these adverse effects have persisted long

after the initial shock (Autor, Dorn, and Hanson 2013, 2016, 2021).

In the future, U.S. policy should aim to mitigate and indeed reverse

the effects that greater exposure to import competition has had on inequal-

ity in America. This requires rebalancing the objectives of trade policy to

give greater weight to its impact on individuals and communities that are

negatively affected. To effectively incorporate these interests, policymaking

must become more inclusive, and thus must be informed not only by the

views of American firms directly engaged in international trade and workers

competing with imports but also by the views of affected communities and

other stakeholders.

In addition, economic scholarship has consistently called for comple-

mentary domestic policies to increase American workers’ competitiveness

and address the disruptions experienced by those affected by negative trade

shocks. Basic economic policies focused on workers would better equip

them to adapt to changes in the economy, including those that are transmit-

ted through international trade (Clausing 2019; Rodrik 1996; Hanson 2021;

Dixit and Norman 1986). The investments in transportation infrastructure

that have been made possible by the Bipartisan Infrastructure Law will make

it easier for U.S. goods exports to reach markets overseas. Greater exports, in

turn, promote economic growth and support well-paying jobs, especially for

blue-collar workers (Riker 2015). Along with the other policy proposals to

fortify America’s supply chains discussed in chapter 6 of this Report, these

investments will also bolster U.S. competitiveness both at home and abroad,

and more broadly distribute the gains from the country’s participation in the

global economy. Looking ahead, the investments in human capital outlined

in chapter 4 of this Report would equip American workers with skills and

education that would enlarge their share in the benefits of international trade

and investment.

Leveling the International Economic Playing Field

Key to broadening the gains from trade is ensuring that American workers

are competing on a level playing field. Too often, the competitiveness of

American workers and firms has been eroded by other countries’ inad-

equate labor standards and unfair trade policies and practices, and also by

international tax competition.

Economic analyses that ignore the negative

effects of these practices provide only a narrow and potentially misleading

view of the gains from trade and how they are distributed domestically and

internationally.

Labor standards. An important component of modern trade agree-

ments between countries are provisions to improve labor conditions. These

Chapter 5 of this Report discusses the importance of fair competition in domestic markets.

The U.S. Economy and the Global Pandemic | 119

are intended to ensure that workers are appropriately compensated and

protected during their work, and that relative competitiveness is not driven

by differences in labor standards between the countries. Twice in 2021, the

United States invoked the rapid response mechanism included in the United

States–Mexico–Canada Agreement to respond to allegations that workers

in Mexico were being denied the rights of free association and collective

bargaining. The first time was in response to corruption uncovered during

a worker vote on a collective bargaining agreement at an automotive plant,

which resulted in the United States and Mexico negotiating a plan to address

the violations and provide for a free and fair vote on the agreement (USTR

2021b). The second responded to a petition filed by the AFL-CIO and others

alleging violations during a union organizing campaign at an auto parts com-

pany (USTR 2021a). The resulting agreement with the company in question

not only secured compensation for the adversely affected workers but also

put in place mechanisms to protect workers’ rights.

Labor standards are also crucial when some producers resort to prac-

tices that are not only unfair but also inhumane, in that they rely on forced

labor. The International Labor Organization (ILO) estimates that 25 million

individuals on any given day are subjected to forced labor (ILO 2017), and

that this forced labor generates large profits for the firms involved (ILO

2014). Though some have argued that market forces on their own will drive

coercive employers out of the labor market, recent theoretical modeling calls

this result into question (Acemoglu and Wolitzky 2011). Indeed, the tragic

persistence of forced labor suggests that policy actions are needed to com-

bat the practice. To this end, Group of Seven leaders, including the United

States, made combating forced labor a priority starting at their June 2021

meeting (Group of Seven 2021). After discussions of conditions in China’s

Xinjiang Uyghur Autonomous Region (White House 2021a), the Group of

Seven called for strengthened cooperation and collective efforts to eradicate

the use of all forms of forced labor in global supply chains.

Responding to unfair trade policies and practices. One of the most

significant challenges for the United States’ ability to realize broadly distrib-

uted gains from trade is the direct and indirect support for targeted industries

used by some foreign governments to promote their own domestic produc-

ers at the expense of other producers, including the United States. Foreign

governments implement such policies using a variety of tools, including

taxes, subsidies, preferential regulatory treatment for domestic enterprises,

broad support for state-owned enterprises or other state-affiliated entities,

and formal and informal restrictions on the ability of foreign enterprises to

compete in the domestic market. At a minimum, these interventions create

economic distortions that disadvantage foreign producers in the domestic

market and often in third-country markets as well, diminishing the benefits

of the commitments they have made under multilateral and preferential trade

120 | Chapter 3

agreements. In more egregious circumstances, they can concentrate market

power in the country that uses them, stifling global competition, limiting

innovation, and creating opportunities for economic coercion (Sykes 2003;

Hart 2020; Autor et al. 2020; Bown 2022).

Global markets for industries such as steel, aluminum, and solar panels

bear the hallmarks of government policies designed to secure market power.

Over time, China’s array of government support and policy directives, which

experts have argued amount to sizable subsidies, have led China to become

the dominant global supplier in each of these industries (Bown and Hillman

2019). Public statements of policy suggest that China is using continued,

targeted government support for specific high-tech manufacturing industries

aimed at promoting its dominance at the expense of its trading partners

(CRS 2020; Creemers et al. 2021). Unchecked, the effects of China’s cap-

ture of these industries can be expected to give Chinese firms substantial

market power, further concentrating crucial aspects of global manufacturing

in a single country, at the expense of producers of competing goods in the

United States (Bown and Hillman 2019). Such policies can also hinder the

adoption of critical innovations, because the subsidies that facilitate market

dominance are not necessarily directed toward the best technology avail-

able (Hart 2020). Importantly, the burdens associated with China’s system

of targeted industrial policies fall not only on the United States but on all

countries whose producers compete with China in global markets (McBride

and Chatzky 2019). As such, efforts to counter the use of these policies are

most effective when pursued collaboratively and in concert with U.S. allies

and partners (Mattoo and Staiger 2020).

Reform of the international corporate tax system. Leveling the playing

field for American workers and businesses requires reform of the interna-

tional corporate taxation system to curtail a race to the bottom in corporate

taxation, whereby countries lower their tax rates to attract mobile multi-

national activities (Azemar et al. 2020). This practice distorts businesses’

decisionmaking, including production decisions, while also generating less

tax revenue than could be obtained if countries engaged with one another

cooperatively (Cobham and Jansky 2018). Large multinational firms have

taken advantage of this tax competition among countries by shifting profits

and economic activities to minimize their tax burdens (Guvenen et al. 2019).

In 2021, world leaders reached a historic agreement that will address

these challenges and stabilize the international tax system. The plan to

reform international tax practices was agreed to by the overwhelming major-

ity of the world’s economies—representing over 90 percent of world GDP.

The agreement includes a global minimum tax of 15 percent that would

apply to profits of multinational firms that have more than €750 million

(about $822 million) in sales globally. It also includes provisions that would

reallocate some taxing rights over certain residual profits of multinational

The U.S. Economy and the Global Pandemic | 121

firms to the markets where products are consumed, regardless of whether

these firms have a physical presence in these markets (OECD 2021).

These reforms respond to concerns that businesses generate value from

profits in certain jurisdictions while paying minimal taxes there. As such,

the agreement addresses existing international tax tensions by incorporating

commitments from several countries to withdraw digital services taxes that

would have fallen disproportionately on multinationals headquartered in the

United States (Giles 2021). The reforms would generate additional revenue

that could help countries address the myriad challenges they face, including

rising inequality.

A Collaborative, Transparent Policymaking Process

Reorienting policy to ensure that the United States’ participation in the

global economy does not exacerbate rising inequality requires important

changes, but experience shows that the benefits of such policy shifts are

greater when they happen after consultation with our trading partners and

through a process that is transparent for those affected. Through trade agree-

ments and through entities such as the World Trade Organization, the United

States has long cooperated with its trading partners to establish and enforce

global trade rules (Bagwell, Bown, and Staiger 2016). In addition to provid-

ing reliable market access for U.S. exporters, such institutions limit the use

of beggar-thy-neighbor policies, which advance one country’s targeted eco-

nomic outcomes at the expense of those of other countries (Ossa 2014). An

approach to addressing the flaws in current U.S. trade policy and in global

trade rules that ignores the commitments the United States has made weak-

ens these institutions and diminishes the benefits that they bring to American

firms and workers. This is exemplified by the retaliatory measures taken

by many of our trading partners in response to U.S. trade policy actions in

2018 and 2019 that they judged to be in violation of commitments made

by the United States under the World Trade Organization’s rules (Mattoo

and Staiger 2020). These retaliatory measures cost U.S. manufacturing jobs

(Flaaen and Pierce 2019), exports (Morgan et al. 2022), incomes, and more

broadly economic welfare in the period immediately after their imposition

(Amiti, Redding, and Weinstein 2019; Cavallo et al. 2021).

Fundamentally, the global system of trade rules benefits not only

domestic producers directly engaged in international trade as importers

or exporters but also buyers of goods and services for which prices are

influenced by global markets. A large body of research has established that

uncertainty negatively affects economic outcomes (Bloom 2014), and more

recent work makes clear that this is also true of trade policy uncertainty

(Caldara et al. 2020; Heise et al. 2021). Global trade rules limit uncertainty

about future changes in tariffs or the imposition of other trade restrictions,

122 | Chapter 3

which can in turn foster investment and employment. Although changes to

U.S. trade policy are needed, elevated uncertainty about how trade policy

might alter prices and availability along global value chains pose a particular

challenge in the wake of the COVID-19 pandemic’s supply chain disruption

(Miroudot 2020).

Making the necessary changes to U.S. international economic policy

to ensure the benefits from trade are more broadly distributed and that

competition takes place on a level playing field demands rethinking some

of the existing rules and norms governing international economic relations.

The practical difficulties of making changes within existing institutions cre-

ates a complex challenge for governments seeking to develop sustainable

international economic policy. However, implementing changes noncoop-

eratively could ultimately leave the United States worse off if its trading

partners no longer feel constrained to respect their own commitments

(Mattoo and Staiger 2020; Bown and Hillman 2019). Trade policy that is

long on combative rhetoric and indifference to trade partners’ interests, but

short on substance and consistency, puts American firms at a disadvantage.

It dissuades our partners and allies from working with the United States to

tackle common challenges. Importantly, it cannot deliver on creating jobs,

reducing inequality, or promoting economic growth more generally. Since

2021, the Biden-Harris Administration has been renewing strong relation-

ships with our trading partners, working to resolve outstanding trade issues

and to establish cooperative frameworks to address emerging challenges.

Conclusion

Comparing the performance of the United States’ economy during 2021 with

that of our trading partners demonstrates this country’s resilience at a time

of daunting challenges. Supported by a strong fiscal response and a rapid

vaccine rollout, the GDP of the United States exceeded its prepandemic

level before those of other major advanced economies. However, as the

recovery got under way, demand continued to tilt toward goods and away

from services. This shift in global consumption patterns interacted with

stressed supply chains to generate inflation in the United States and most of

our major trading partners, although this effect was particularly pronounced

here due to the relative strength of our recovery. The faster pace of the U.S.

economic recovery has also resulted in a widening trade deficit.

Openness to international commerce provides substantial benefits to

the U.S. economy. However, these benefits have at times come at the cost

of wider domestic inequality. We must engage with our partners and allies to

make international economic engagement work for all Americans, by ensur-

ing that the global rules are aligned with domestic objectives and values, and

that these rules are rigorously enforced.

123

References

Chapter 3

Acemoglu, D., and A. Wolitzky. 2011. “The Economics of Labor Coercion.”

Econometrica 79: 555–600. https://economics.mit.edu/files/8975.

Amiti, M., S. Redding, and D. Weinstein. 2019. “The Impact of the 2018 Tariffs on Prices

and Welfare.” Journal of Economic Perspectives 33, no. 4: 187–210.

Anand, A., J. Sandefur, and A. Subramanian. 2021. Three New Estimates of India’s

All-Cause Excess Mortality during the COVID-19 Pandemic. CGD Working

Paper 589. Washington: Center for Global Development.

Antràs, P., A. de Gortari, and O. Itskhoki. 2017. “Globalization, Inequality and Welfare.”

Journal of International Economics 108: 387–412. https://scholar.harvard.edu/

files/antras/files/agi_published.pdf.

Autor, D., D. Dorn, and G. Hanson. 2013. “The China Syndrome: Local Labor Market

Effects of Import Competition in the United States.” American Economic

Review 103, no. 6: 2121–68. https://www.aeaweb.org/articles?id=10.1257/

aer.103.6.2121.

———. 2016. The China Shock: Learning from Labor Market Adjustment to Large

Changes in Trade. NBER Working Paper 21906. Cambridge, MA: National

Bureau of Economic Research. https://www.nber.org/papers/w21906.

———. 2021. On the Persistence of the China Shock. NBER Working Paper 29401.

Cambridge, MA: National Bureau of Economic Research. https://www.nber.org/

papers/w29401.

Autor, D., D. Dorn, G. Hanson, G. Pisano, and P. Shu. 2020. “Foreign Competition and

Domestic Innovation: Evidence from U.S. Patents.” American Economic

Review: Insights 2, no. 3: 357–74.

Azemar, D., and I. Wooton. 2020. “Is International Tax Competition Only About Taxes?

A Market-Based Perspective.” Journal of Comparative Economics 48, no. 4:

891–912.

Bair, J., A. Guerra Luz, and B. Bradham. 2021. “Americans Desperate to Get Out Set

Stage for Gasoline Comeback.” Bloomberg, April 9. https://www.bloomberg.

com/news/articles/2021-04-09/

americans-desperate-to-get-out-set-stage-for-gasoline-comeback.

Bagwell, K., C. Bown, and R. Staiger. 2016. “Is the WTO Passé?” Journal of Economic

Literature 54, no. 4: 1125–1231.

124 | References

BEA (Bureau of Economic Analysis). 2022a. “International Trade in Goods and

Services.” https://www.bea.gov/data/intl-trade-investment/

international-trade-goods-and-services.

———. 2022b. “Personal Income and Outlays Data.” https://www.bea.gov/data/income-

saving/personal-income.

———. 2021c. “Quarterly Real Gross Domestic Product Accounts.” https://www.bea.

gov/data/gdp/gross-domestic-product.

Bernstein, J., and L. Wallach. 2016. “The New Rules of the Road: A Progressive

Approach to Globalization.” American Prospect, no. 22. https://

jaredbernsteinblog.com/wp-content/uploads/2016/09/The-New-Rules-of-the-

Road.pdf.

Bloom, N. 2014. “Fluctuations in Uncertainty.” Journal of Economic Perspectives 28, no.

2: 153–16.

BLS (Bureau of Labor Statistics). 2014. “How the Government Measures

Unemployment.” Current Population Survey Technical Documentation. https://

www.bls.gov/cps/cps_htgm.htm.

———. 2022a. “Civilian Unemployment Rate.” https://www.bls.gov/charts/employment-

situation/civilian-unemployment-rate.htm.

———. 2022b. “Consumer Price Index Databases.” https://www.bls.gov/cpi/data.htm.

Boissay, F., E. Kohlscheenm, R. Moessner, and D. Rees. 2021. Labour Markets and

Inflation in the Wake of the Pandemic. BIS Bulletin 47. Basel: Bank for

International Settlements. https://www.bis.org/publ/bisbull47.pdf.

Boone, L. 2021. “The EA and the U.S. in the COVID-19 Crisis: Implications for the

2022–2023 Policy Stance.” OECD Ecosocope, blog.

Bown, C. 2021. “How COVID-19 Medical Supply Shortages Led to Extraordinary Trade

and Industrial Policy.” Asian Economic Policy Review 9999: 1–22.

———. 2022. “Trump Ended WTO Dispute Settlement; Trade Remedies Are Needed to

Fix It.” Working Paper 22-1, Peterson Institute for International Economics,

Washington.

Bown, C., and J. Hillman. 2019. “WTO’ing a Resolution to the China Subsidy Program.”

Journal of International Economic Law 22, no. 4: 557–78.

Bruce, A. 2021. “Goods, Not Services, Back in Vogue with U.K. Consumers as Omicron

Spreads.” Reuters, December 9. https://www.reuters.com/world/uk/

black-friday-pushes-uk-card-spending-new-pandemic-high-ons-2021-12-09/.

Bushey, C. “The e-Bike That Encapsulates the Global Supply Chain Crisis.” Financial

Times, December 22.

Caldara, D., M. Iacoviello, P. Molligo, A. Prestipino, and A. Raffo. 2020. “The Economic

Effects of Trade Policy Uncertainty.” Journal of Monetary Economics 109:

38–59.

Campbell, E., A. McDarris and W. Pizer. 2021. “Border Carbon Adjustments 101.”

Resources for the Future. https://www.rff.org/publications/explainers/

border-carbon-adjustments-101/.

References | 125

Caselli, F., M. Koren, M. Lisicky, and S. Tenreyro. 2020. “Diversification through

Trade.” Quarterly Journal of Economics 135: 449–502.

Cavallo, A., G. Gopinath, B. Neiman, and J. Tang. 2021. “Tariff Pass-Through at the

Border and at the Store: Evidence from U.S. Trade Policy.” American Economic

Review: Insights 3, no. 1: 19–34.

Census Bureau. 2022a. “Foreign Trade: County and Product Trade Data.” https://www.

census.gov/foreign-trade/statistics/country/index.html.

———. 2022b. “U.S. International Trade in Goods and Services.” https://www.census.

gov/foreign-trade/Press-Release/current_press_release/index.html.

CNBS (China National Bureau of Statistics). 2021a. “Statistical Database.” https://data.

stats.gov.cn/english/easyquery.htm?cn=B01.

———. 2021b. “Statistical Database.” https://data.stats.gov.cn/english/easyquery.

htm?cn=B01.

Chetty, R., J. Friedman, N. Hendren, M. Stepner, and Opportunity Insights Team. 2020.

The Economic Impacts of COVID-19: Evidence from a New Public Database

Built Using Private Sector Data. NBER Working Paper 27431. Cambridge,

MA: National Bureau of Economic Research.

Clausing, K. 2003. “Tax-Motivated Transfer Pricing and US Intrafirm Trade Prices.”

Journal of Public Economics 87, nos. 9–10: 2207–23.

———. 2019. Open: The Progressive Case for Free Trade, Immigration, and Global

Capital. Cambridge, MA: Harvard University Press.

———. 2020. “Profit Shifting Before and After the Tax Cuts and Jobs Act.” National Tax

Journal 73, no. 4.

Cobham, A., and P. Jansky, 2018. “Global Distribution of Revenue Loss from Corporate

Tax Avoidance: Re-estimation and Country Results.” Journal of International

Development 30, no. 2: 206–32.

Creemers R., H. Dorwart, K. Neville, and K. Shaefer. 2021. “Translation: 14th Five-Year

Plan for National Informatization—Dec. 2021.” Digichina, Cyber Policy

Center, Stanford University.

CRS (Congressional Research Service). 2020. “‘Made in China 2025’ Industrial Policies:

Issues for Congress.” https://sgp.fas.org/crs/row/IF10964.pdf.

D’Aguanno, L., O. Davies, A. Dogan, R. Freeman, S. Lloyd, D. Reinhardt, R. Sajedi, and

R. Zymek. 2021. “Global Value Chains, Volatility and Safe Openness: Is Trade

a Double-Edged Sword?” Financial Stability Paper 46, Bank of England,

London.

Dechezlepretre, A. and Sato, M. 2017. “The Impacts of Environmental Regulations on

Competitiveness.” Review of Environmental Economics and Policy 11, no. 2:

183-206. https://www.journals.uchicago.edu/doi/full/10.1093/reep/rex013.

Dixit, A., and V. Norman. 1986. “Gains from Trade Without Lump-Sum Compensation.”

Journal of International Economics 21, nos. 1–2: 111–22. https://www.

sciencedirect.com/science/article/abs/pii/0022199686900085.

126 | References

Djankov, S. 2021. “How Do Companies Avoid Paying International Taxes?” Realtime

Economic Issues Watch, Peterson Institute for International Economics,

Washington.

Economist. 2021. “Why Has the Dollar Weakened during the Pandemic?” April 2. https://

www.economist.com/the-economist-explains/2021/02/04/

why-has-the-dollar-weakened-during-the-pandemic.

EIA (U.S. Energy Information Administration). 2020. “OPEC+ Agreement to Reduce

Production Contributes to Global Oil Market Rebalancing.” Today in Energy,

September 23. https://www.eia.gov/todayinenergy/detail.php?id=45236.

———. 2021a. “What Countries Are the top Producers and Consumers of Oil?” https://

www.eia.gov/tools/faqs/faq.php?id=709&t=6.

———. 2021b. “Cold Weather Led to Refinery Shutdowns in U.S. Gulf Coast Region.”

Today in Energy, March 1. https://www.eia.gov/todayinenergy/detail.

php?id=46936.

———. 2021c. “Hurricane Ida Disrupted Crude Oil Production and Refining Activity.”

Today in Energy, September 1. https://www.eia.gov/todayinenergy/detail.

php?id=49576.

———. 2021d. “Pre-Labor Day Retail Gasoline Prices at Highest Level Since 2014.”

Today in Energy, September 3. https://www.eia.gov/todayinenergy/detail.

php?id=49416.

———. 2022. “Crude Oil Prices: West Texas Intermediate (WTI).” https://fred.stlouisfed.

org/series/DCOILWTICO.

Eurostat. 2022a. “Monthly Harmonized Index of Consumer Prices Database.” https://

ec.europa.eu/eurostat/web/hicp/data/database.

———. 2022b. “Production in Industry: Monthly Database.” https://ec.europa.eu/

eurostat/databrowser/view/sts_inpr_m/default/table?lang=en.

———. 2022c. “Quarterly National Accounts Tables.” https://ec.europa.eu/eurostat/web/

national-accounts/data/main-tables.

Ewing, J., and N. Boudette. 2021. “A Tiny Part’s Big Ripple: Global Chip Shortage

Hobbles the Auto Industry.” New York Times, April 23. https://www.nytimes.

com/2021/04/23/business/auto-semiconductors-general-motors-mercedes.html.

Federal Reserve Board. 2022. “Industrial Production and Capacity Utilization Database.”

https://www.federalreserve.gov/releases/g17/current/.

Flaaen, A., and J. Pierce. 2019. Disentangling the Effects of the 2018–2019 Tariffs on a

Globally Connected U.S. Manufacturing Sector. Finance and Economics

Discussion Paper 2019-086. Washington: Federal Reserve Board.

Furman, J., and W. Powell. 2021. “U.S. Economy Slows in Third Quarter as Spending

and Business Investment Growth Sag.” Realtime Economic Issues Watch,

Peterson Institute for International Economics, Washington. https://www.piie.

com/blogs/realtime-economic-issues-watch/

us-economy-slows-third-quarter-spending-and-business-investment.

References | 127

GACC (General Administration of Customs of the People’s Republic of China). 2021.

Monthly Bulletin, http://english.customs.gov.cn/statics/report/monthly.html.

Retrieved from Haver Analytics, “China: Merchandise Exports, FOB.”

Giles, C. 2021. “World’s Leading Economies Agree Global Minimum Corporate Tax

Rate.” Financial Times, July 1. https://www.ft.com/content/

d0311794-abcf-4a2a-a8a4-bcabfc4f71fa.

Gross, A., Miller, J. and Inagaki, K. 2021. “Chip Shortage Drags on as Plant Closures Hit

Carmakers.” Financial Times, September 14. https://www.ft.com/

content/86336d38-6b89-4637-a2a5-3978d14fb324.

Group of Seven. 2021. “The Joint Statement Issued by the G7 Countries at the G7 Trade

Track on Forced Labour.” https://www.g7uk.org/

g7-trade-ministers-statement-on-forced-labour/.

Gruber, J., A. McCallum, and R. Vigfusson. 2016. “The Dollar in the U.S. International

Transactions (USIT) Model.” International Finance Discussion Paper Note.

Board of Governors of the Federal Reserve System, Washington. https://www.

federalreserve.gov/econresdata/notes/ifdp-notes/2016/the-dollar-in-the-us-

international-transactions-model-20160208.html.

Grubert, H., and J. Mutti. 1991. “Taxes, Tariffs and Transfer Pricing in Multinational

Corporate Decision Making.” Review of Economics and Statistics 73, no. 2:

285–93.

Guvenen, F., R. Mataloni Jr., D. Rassier, and K. Ruhl. 2019. Offshore Profit Shifting and

Domestic Productivity Measurement. NBER Working Paper 23324. Cambridge,

MA: National Bureau of Economic Research.

Hanson, G. 2021. “Can Trade Work for Workers?” Foreign Affairs, May–June. https://

www.foreignaffairs.com/articles/united-states/2021-04-20/

can-trade-work-workers.

Hardy, B., and T. Logan. 2020. “Racial Economic Inequality Amid the COVID-19

Crisis.” Hamilton Project, Washington. https://www.brookings.edu/research/

racial-economic-inequality-amid-the-covid-19-crisis/.

Harper Petersen. 2022. “Harpex Index.” https://www.harperpetersen.com/harpex.

Hart, D. 2020. “The Impact of China’s Production Surge on Innovation in the Global

Solar Photovoltaics Industry.” Information Technology & Innovation

Foundation, Washington.

Heise, S., J. Pierce, G. Schaur, and P. Schott. 2021. “Tariff Rate Uncertainty and the

Structure of Supply Chains.” Working paper, Yale School of Management, New

Haven, CT. https://cowles.yale.edu/3a/heisepierceschaurschottsupplychains-

tariff-rate-uncertainty-and-structure-supply-chains.pdf.

Hobijn, B., and A. Şahin. 2021. Maximum Employment and the Participation Cycle.

NBER Working Paper 29222. Cambridge MA: National Bureau of Economic

Research. https://www.nber.org/system/files/working_papers/w29222/w29222.

pdf.

128 | References

Huizinga, H., and L. Laeven. 2008. “International Profit Shifting Within Multinationals:

A Multi-Country Perspective.” Journal of Public Economics 92, no. 5:

1164–82.

ILO (International Labor Organization). 2014. Profits and Poverty: The Economics of

Forced Labour. Geneva. ILO.

———. 2017. Global Estimates of Modern Slavery: Forced Labour and Forced

Marriage. Geneva. ILO.

IMF (International Monetary Fund). 2021. International Financial Statistics. Retrieved

from FRED, “Global Price of Natural Gas, EU.” https://fred.stlouisfed.org/

series/PNGASEUUSDM.

INEGI (Instituto Nacional de Estadística, Geografía, e Informática of Mexico). 2022.

“Quarterly Gross Domestic Product Database.” https://en.www.inegi.org.mx/

programas/pib/2013.

International Energy Agency. 2021. World Energy Investment 2021. Paris: International

Energy Agency. https://iea.blob.core.windows.net/assets/5e6b3821-bb8f-4df4-

a88b-e891cd8251e3/WorldEnergyInvestment2021.pdf

Jiang, Z., A. Krishnamurthy, and H. Lustig. 2021. “Foreign Safe Asset Demand and the

Dollar Exchange Rate.” Journal of Finance 76, no. 3: 1049–89. https://

onlinelibrary.wiley.com/doi/epdf/10.1111/jofi.13003.

Johns Hopkins. 2022. “Mortality Analyses.” Coronavirus Resource Center, Johns

Hopkins University, Baltimore. https://libanswers.snhu.edu/faq/48009.

Kovak, B., L. Oldenski, and N. Sly. 2021. “The Labor Market Effects of Offshoring by

U.S. Multinational Firms.” Review of Economics and Statistics 103, no. 2:

381–96.

Kuzmanovic, A., and J. Rassineux. No date. “Post COVID-19 Aerospace Industry.”

Deloitte Points of View Blog.

Lawler, A., A. Ghaddar, and O. Astakhova. 2021. “OPEC+ Sticks to Plan for Gradual Oil

Output Hike, Price Roars Higher.” Reuters, October 4. https://www.reuters.com/

business/energy/

opec-seen-keeping-oil-output-policy-unchanged-opec-sources-say-2021-10-04/.

Liu, O., and T. Mai. 2020. “Employment during the COVID-19 Pandemic: Collapse and

Early Recovery.” Working paper, Columbia University, New York. https://

papers.ssrn.com/sol3/papers.cfm?abstract_id=3682369.

Lorentz, S., and S. Mokkas. 2015. “Evidence for Profit Shifting with Tax-Sensitive

Capital Stocks.” Financial Archive: Public Finance Analysis 71, no. 1: 1–36.

Marine Digital. 2021. “15 Biggest Shipping Companies in the World.” https://marine-

digital.com/article_15biggest_shipping_companies.

Mattoo, A., and R. Staiger. 2020, “Trade Wars: What Do They Mean? Why Are They

Happening Now? What Are the Costs?” Economic Policy 35, no.103: 563–84.

McBride, J., and A. Chatzky. 2019. “Is ‘Made in China 2025’ a Threat to Global Trade?”

Council on Foreign Relations. https://www.cfr.org/backgrounder/

made-china-2025-threat-global-trade.

References | 129

McKinsey & Company. 2021. “Coping with The Auto-Semiconductor Shortage:

Strategies for Success.” https://www.mckinsey.com/industries/automotive-and-

assembly/our-insights/

coping-with-the-auto-semiconductor-shortage-strategies-for-success.

METI (Ministry of Economy, Trade, and Finance of Japan). 2021. “Indexes of Industrial

Production Historical Database.” https://www.meti.go.jp/english/statistics/tyo/

iip/b2015_result-2.html.

Milesi-Ferretti, G. 2021. “A Most Unusual Recovery: How the US Rebound from

COVID Differs from Rest of G7.” Brookings Institution, Up Front Blog.

https://www.brookings.edu/blog/

up-front/2021/12/08/a-most-unusual-recovery-how-the-us-rebound-from-covid-

differs-from-rest-of-g7/.

Miroudot, S. 2020. “Reshaping the Policy Debate on the Implications of COVID-19 for

Global Supply Chains.” Journal of International Business Policy, no. 3:

430–42.

Moll, B., L. Rachel, and P. Restrepo. 2021. Uneven Growth: Automation’s Impact on

Income and Wealth Inequality. NBER Working Paper 28440. Cambridge, MA:

National Bureau of Economic Research.

Mongey, S., L. Pilossoph, and A. Weinberg. 2021. “Which Workers Bear the Burden of

Social Distancing?” Journal of Economic Inequality 19, no. 3: 509–26.

Morgan, S., S. Arita, J. Beckman, S. Ahsan, D. Russell, P. Jarrell, and B. Kenner. 2022.

The Economic Impacts of Retaliatory Tariffs on U.S. Agriculture. Economic

Research Report 1962-2022-080. Washington: U.S. Department of Agriculture.

https://www.ers.usda.gov/publications/pub-details/?pubid=102979.

OECD (Organization for Economic Cooperation and Development). 2020. “Job Retention

Schemes during the COVID-19 Lockdown and Beyond.” OECD Policy

Responses to Coronavirus.

———. 2021. “Statement on a Two-Pillar Solution to Address the Tax Challenges

Arising from the Digitalisation of the Economy.” https://www.oecd.org/tax/

beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-

from-the-digitalisation-of-the-economy-october-2021.htm.

ONS (U.K. Office of National Statistics). 2022. “GDP Quarterly National Accounts Time

Series.” https://www.ons.gov.uk/economy/grossdomesticproductgdp/datasets/

quarterlynationalaccounts.

Ossa, R. 2014. “Trade Wars and Trade Talks with Data.” American Economic Review

104, no. 12: 4104–46.

OWID (Our World in Data). No date. “Data on COVID-19 (Coronavirus) by Our World

in Data.” https://github.com/owid/covid-19-data/tree/master/public/data.

Ponczuk, M. 2021. “The European Union Recommends Opening to Americans to Rescue

the Summer.” New York Times, June 18. https://www.nytimes.com/2021/06/18/

world/europe/eu-us-covid-tourism.html.

130 | References

Riker, D. 2015. “Export-Intensive Industries Pay More on Average: An Update.” U.S.

International Trade Commission, Office of Economics Research, Note

2015-0A.

Riordan, P. 2021. “China’s Energy Crisis: What Caused the Crunch?” Financial Times,

October 10.

Rodrik, D. 1996. Why Do More Open Economics Have Bigger Governments? NBER

Working Paper 5537. Cambridge, MA: National Bureau of Economic Research.

https://www.nber.org/system/files/working_papers/w5537/w5537.pdf.

Rovnick, N., J. Rennison, and E. Platt. 2021. “Dollar Rallies and Big Tech Gains After

Further Uptick in U.S. Inflation.” Financial Times, July 13. https://www.ft.com/

content/3a14dd44-0af9-4c51-8b6d-6bcd2612849b.

Schengen Visa Info. 2021. “EU Countries to Permit Entry for Vaccinated Americans in

Summer 2021.” COVID-19 & EU Travel Restrictions. https://www.

schengenvisainfo.com/news/

eu-countries-to-permit-entry-for-vaccinated-americans-in-summer-2021/.

Statistics Canada. 2022. “Expenditure-Based Gross Domestic Product Tables.” https://

www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610010401.

Sullivan, D., and T. von Wachter. 2009. “Job Displacement and Mortality: An Analysis

Using Administrative Data.” Quarterly Journal of Economics 124, no 3: 1265–

1306. https://doi.org/10.1162/qjec.2009.124.3.1265.

Sykes, A. 2003. The Economics of WTO Rules on Subsidies and Countervailing

Measures. John M. Olin Program in Law and Economics Working Paper 186.

Chicago: Coase-Sandor Institute for Law and Economics.

Tai, K. 2021. “The Biden-Harris Administration’s ‘Worker-Centered Trade Policy.’”

Office of U.S. Trade Representative, Transcript of Remarks at June 10

AFL-CIO Town Hall.

USTR (U.S. Trade Representative). 2021a. “Fact Sheet: Biden Administration Reaches

Agreement with Mexican Auto Parts Company to Protect Workers’ Rights.”

https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2021/august/

fact-sheet-biden-administration-reaches-agreement-mexican-auto-parts-

company-protect-workers-rights.

———. 2021b. “Fact Sheet: Biden Administration Reaches Agreement with Mexico on

GM Silao Rapid Response Action and Delivers Results for Workers.” https://

ustr.gov/about-us/policy-offices/press-office/fact-sheets/2021/july/

fact-sheet-biden-administration-reaches-agreement-mexico-gm-silao-rapid-

response-action-and-delivers.

Von Wachter, T. 2020. “A Proposal for Scaling Enrollments in Work Sharing (Short-Time

Compensation) Programs During the Covid-19 Crisis: The Case of California.”

Working paper, University of California, Los Angeles.

Weichenrieder, A. 2009. “Profit Shifting in the EU: Evidence From Germany.”

International Tax and Public Finance 16: 281–97.

White House. 2021a. “Fact Sheet: New U.S. Government Actions on Forced Labor in

Xinjiang.” https://www.whitehouse.gov/briefing-room/

References | 131

statements-releases/2021/06/24/

fact-sheet-new-u-s-government-actions-on-forced-labor-in-xinjiang/.

———. 2021b. “Fact Sheet: The United States and European Union to Negotiate World’s

First Carbon-Based Sectoral Arrangement on Steel and Aluminum Trade.”

https://www.whitehouse.gov/briefing-room/statements-releases/2021/10/31/

fact-sheet-the-united-states-and-european-union-to-negotiate-worlds-first-carbon-

based-sectoral-arrangement-on-steel-and-aluminum-trade/.

———. 2021c. “Fact Sheet: Biden Administration Releases Additional Detail for

Implementing a Safer, More Stringent International Air Travel System.” https://

www.whitehouse.gov/briefing-room/statements-releases/2021/10/25/

fact-sheet-biden-administration-releases-additional-detail-for-implementing-a-

safer-more-stringent-international-air-travel-system/.

132 | References