Coronavirus Expected to Cut Global Exports by $50 Billion

The coronavirus outbreak is expected to decrease global exports by $50 billion as the spread of the virus continues to disrupt global supply chains, according to a March 4 report by the United Nations Conference on Trade and Development. The slowdown is directly tied to China’s manufacturing Purchasing Managers Index, which fell by 22 points in February, implying a 2% reduction in exports on an annual basis, the report said. The fact that China is a “central manufacturing hub” will have significant “repercussions” for countries reliant on trade with the country, the report said. “Any slowdown in manufacturing in one part of the world will have a ripple effect in economic activity across the globe because of regional and global value chains,” UNCTAD Secretary-General Mukhisa Kituyi said in a statement.

The UN said the sectors impacted the most include precision instruments, machinery, automotive and communication equipment, while the most affected economies being the European Union, the U.S., Japan, South Korea, Taiwan, China and Vietnam. The report said European auto manufacturers may face shortages of “critical components” for their exports, while Japanese companies may face challenges sourcing parts for digital cameras. “For many companies, the limited use of inventories brought by a lean and just-in-time manufacturing process would result in shortages that will impact their production capabilities and overall exports,” the report said.

While the coronavirus impact on China’s production is still “unknown” the UN expects a “significant downturn” will become apparent in the “coming months.” In addition, container vessel departures from Shanghai were “substantially lower” during the first half of February but with “an increase in the second half,” the report said. The Shanghai Containerized Freight Index “continues to decline,” indicating “excess shipping capacity and lower demand for container vessels.”

Even if the virus is contained “mostly within China,” the virus will still impact value chains in Europe, the Americas and East Asia, the report said. “Spillover effects” from the virus may also differ across economies, the report said, and may impact supply chains in areas in which “the industry is geographically localized in the region where the outbreak … occurred.”