Top Story: COVID-19 Impact On Trade Expands

As the United States reported the first death in the country from the coronavirus last week, the total confirmed cases of the disease worldwide climbed to more than 90,000, and over 45,000 people infected have since recovered. At the same time reported deaths from the virus exceed 3,000. That would make the death rate of the coronavirus about 20 times that of the flu in the U.S., according to CDC figures.

Those statistics have led to containment actions that have impacted the flow of global trade. While the virus itself still has little impact on trade, actions to contain it do, and the industry is struggling to predict exactly how severe those restrictions may become as more regions become impacted.

Supply chains to date have been significantly squeezed by the reduction in factory output from areas subject to quarantine, and by the reduction in commercial traffic, especially air traffic, that hampers the flow of goods from affected areas.

The outbreak has become increasingly global and spread to nearly 60 countries. New hot spots include Iran, Italy, and South Korea. On Friday, the World Health Organization increased its risk assessment to “very high.”

In response to the widening outbreak, the stock market plunged at a rate not seen since the 2008 financial crisis. Yesterday, markets bounced back tremendously from last week’s brutal selloff, surging on news that global central banks were poised to provide stimulus to combat the outbreak's effects on the economy and markets.

Monday gains offset a little more than a third of last week's historic losses, but the full impact of the virus on the world economy is still unknown. Federal Reserve Vice Chairman Richard H. Clarida said that economic disruptions in China from the virus “could spill over to the rest of the global economy” but added that “it is still too soon to even speculate about either the size or the persistence of these effects, or whether they will lead to a material change in the outlook.”

The U.S. economy is currently growing steadily, with a jobless rate that has hovered near a half-century low for more than a year. Inflation remains below the Federal Reserve’s 2 percent target.

Deliveries to U.S. stores and factories will surely be impacted by quarantines in China, Japan, and Italy.

Items such as surgical masks are already reported to be in short supply. FTZs might be used to help defray the cost of hoarding production components and finished goods, but would only be effective if items ship before quarantines or other forms of disruption take effect. The elimination of passenger flights also reduces the freight capacity of the airlines, making it harder to access air shipments as a backup to supply shortages.

Other types of supply shortages might also take effect in an attempt to control the spread of the virus. President Trump told reporters the U.S. will consider closing its border crossings.

In response to a press conference question about the border with Mexico, the President said his administration was "thinking about" possibly closing the country's borders.

"But right now that's not a border as it pertains to what we're talking about here. This is not a border that seems to be much of a problem right now. We hope we won't have to do that."

Uncoordinated impacts may also present a challenge. Over the weekend, workers at the Louvre in Paris closed the museum out of fears of the spreading virus.

“We are very worried because we have visitors from everywhere,” said Andre Sacristin, a Louvre employee and union representative for its staffers. “The risk is very, very, very great," he said in a phone interview. While there are no known virus infections among the museum's 2,300 workers, “it’s only a question of time,” he said.