The Bank of England published Staff Working Paper No. 1,189, which examines how Covid-19 travel restrictions affected goods trade across borders. Using a gravity framework with internal trade flows to separate border effects from broader pandemic demand and supply shocks, the paper finds that travel restrictions acted like a classic border friction that materially raised the cost of cross-border trade. A full border closure reduced bilateral trade by around 19% for a typical country pair and implied an approximate 23% hit to global trade in 2020 Q2. The estimated impact was highly uneven across countries and transport channels. Trade losses were larger for geographically proximate partners, with the paper estimating a hit of about 37% for the closest country pair and about 8% for the most distant. Road and air trade were significantly disrupted, while seaborne and rail trade were not. The interaction between distance and transport exposure explains why some countries were able to close borders at a lower trade cost than others. The paper also finds no evidence of long-run scarring, with trade rebounding strongly and temporarily overshooting once restrictions were eased.
Bank of England2026-06-18
Bank of England publishes working paper finding Covid travel restrictions cut bilateral trade by about 19% and global trade by 23% in 2020 Q2
The Bank of England published a staff working paper finding that Covid-19 travel restrictions increased cross-border trade costs, with a full closure reducing bilateral trade by about 19% for a typical country pair and lowering global trade by roughly 23% in 2020 Q2. The hit was larger for nearby partners and for trade moved by road and air, while sea and rail were not significantly affected. The paper finds no long-run scarring, with trade rebounding and briefly overshooting after restrictions eased.