Coronavirus Impact on Trade- End in Sight or Just the Beginning?

March 9, 2020

Anyone recall the uncertainty of the impact of tariffs on US trade? Now that we are in the coronavirus environment, uncertainty has expanded exponentially as the virus has spread out of China and is impacting other parts of Asia, the United States, Europe and the Middle East. Trade in the first quarter of 2020 has slumped dramatically. The World Bank has already reduced global gross domestic product projections for 2020 from 2.9 percent growth to 2.4 percent and suggests that it could go down a further full percentage point.

 

The largest global economies have taken heed and are looking for economic measures to counter the downturn. A mix of interest rate cuts and monetary injections to boost economic production have already been announced. A meeting of the G7 was assembled to coordinate reactions. The question is whether any of this can help boost trade and consumption when large numbers of consumers and workers are in quarantine and not in a position to take advantage of these measures. Tourism is badly impacted, and only Wall Street – which has been up one day and down the next – appears to benefit from the policy statements.

 

China is very slowly coming to grips with the crisis and production is slowly coming back on stream, but logistics supply chains are in disarray and shortages of parts and goods are with us. South Korea is in partial turmoil and all of northern Italy, the heart of manufacturing, is in lockdown. The spread of the virus appears to have been reflected in the US Purchasing Manager’s Index, which fell to 50.1 percent in February from 50.9 percent in January.

 

Our projections are based on the optimistic view that by the end of March or early April some form of normalcy will have returned to trade. We do not expect an immediate bounce-back recovery, however, with low trade growth likely in the first half of the year followed by some recovery in the second half. Our projection for total containerized imports for the year is 2.4 percent growth but there is a significant downside risk if the virus continues to spread in the United States and its trading partners.

 

The ports, so far, are continuing to work ships coming from virus-effected regions, while airlines are canceling flights to most of the impacted areas.

Please reload

Recent Posts

Please reload

Archive

Please reload

Tags

Please reload

 

202-640 2057

©2017 by Hackett Associates, LLC