Trade credit, trade finance, and the Covid-19 Crisis

Key takeaways

• As the Covid-19 pandemic hits economic activity, the vulnerabilities of longer and more geographically extended trade credit chains are coming to the fore, especially those related to international trade.
• While risk mitigation is available from financial intermediaries, the bulk of the exposures associated with supply chains is borne by the participating firms themselves, through inter-firm credit.
• Given the prevalence of the US dollar in trade financing, measures such as central bank swap lines that ease global dollar credit conditions may cushion the impact of the pandemic on global value chains.

Methodological note about the creation of Graph 2

Underlying data