Does the import diversity of inputs mitigate the negative impact of COVID-19 on global value chains?

This study sheds light on the role of the import diversity of inputs and explores the effects of COVID-19 on global value chains (GVCs). Using monthly export data of final machinery products for 35 countries and indicators of diversity with 252 trade partner countries, we investigate the supply-side effects of COVID-19 on GVCs during the period from January to August 2020 and examine how the import diversity of inputs influences such effects. As a result, we find the negative supply-side effects in all three machinery industries, with the greatest ones in the transport equipment industry. In addition, such negative impacts on machinery industries are larger during the trade–fall period from February to May 2020. Furthermore, we demonstrate that the import diversity of inputs had a significant influence in partially mitigating the harmful supply-side effects of COVID-19, particularly during the early period of February–March 2020.