The economy has taken a huge toll in recent weeks with stock markets tumbling and uncertainties around every corner. Both domestic and global economies are waiting to see just how far reaching the impact of the coronavirus will be before conditions improve.
Since the initial outbreak in Wuhan, China, in late December, more than 110 locations around the world have reported cases. With companies and governments restricting travel, global trade is being impacted in numerous ways.
In early March, Director General Robert Azevedo of the World Trade Organization said the global economy would be affected substantially. Signs will begin to appear in trade data in the weeks ahead, he said.
Here are just some of the ways in which trade is being impacted.
In terms of global trade quantity, nearly 80 percent of shipping happens by sea and China hosts the seven busiest container ports. Companies providing overseas deliveries have reduced the number of vessels in operation due to reduced orders, factory shutdowns and other disruptions. Some ships have not been able to get to port. Others are stuck at docks awaiting workers to return to their duties. Even more vessels are presently quarantined at sea. Products shipped in containers by sea range from cars to consumer goods to medicines and, of course, RV products and components.
DHL reports severe disruptions with every aspect of inbound and outbound cargo shipments affected. Air, truck and rail services are all hindered. FedEx and UPS are still operating in and out of China, but UPS reports it has seen reduced demand due to extensive business closures.
Supply Chain Impact
Companies reliant on Chinese factories for parts and materials will continue to experience challenges. Many manufacturing facilities have reduced production and the trend is expected to continue for months. Supply lead times will continue to wreak havoc on companies, including some in our industry. The Harvard Business Review reported peak impacts from supply chain interruptions are happening now. As a result, it said, many U.S. and European factories may need to slow down or discontinue production and assembly temporarily until things normalize.
The UN Division on International Trade and Commodities suggested the automotive industry may experience export interruptions more than other goods.
Another industry with far-reaching impacts is the $2.5 billion trade show industry. Numerous organizations and associations have canceled shows and conferences. Some of the larger cancellations include Facebook’s Developers Conference, the South by Southwest event in Austin, Texas, and Google’s IO 20/20, its largest event of the year. The New York Auto Show, Boston Marathon and other large events have been postponed. These cancellations have far-reaching economic impact to hotels, event venues, travel and restaurants and the companies who paid to host these events.
Regarding tourism, the travel analytics firm ForwardKeys recently reported that the longer the duration of the outbreak, the more likely it is that travel restrictions will lead to no travel at all.
Path to Normalization
Companies can expect continued delays with Chinese goods for the foreseeable future. Organizations must remain flexible and adapt as needed to mitigate supply chain delays. Just how long the virus will continue to impede trade and commerce is an unknown, but the one thing we can be assured of is the recovery process will be a long and arduous journey.