As students, we often focus more on demand-side factors when analysing inflation, but this article is a great reminder of how supply-side shocks can have equally powerful effects. A surge in shipping costs between China and the US is now causing higher consumer prices in the UAE — even though the UAE isn’t directly involved in that trade dispute. This perfectly demonstrates the interdependence created by globalization, where events in one region can disrupt supply chains and affect prices worldwide. In this case, the global shortage of containers has raised transportation costs, shifting the aggregate supply curve leftwards, leading to cost-push inflation. It’s a clear example of how a policy or conflict between two countries can reduce global efficiency and create imported inflation in a third economy. In exams, this kind of question could easily appear as: “Explain how global supply disruptions can affect domestic inflation and living standards.”
Source: Khaleej Times