Global trade sputters, leaving inconsistencies
WASHINGTON >> Factories are idled. Workers are in lockdown. Goods are piling up at some ports, while elsewhere container ships sail empty. Dairy farmers are dumping their milk, while toilet paper aisles at the grocery store have been picked bare.
The spread of the coronavirus has disrupted global supply chains, leading to shortages and price increases that are cascading from factories to ports to retail stores to consumers. While factories in China have been slowly restarting as the country’s epidemic fades, many manufacturers in India, the United States and Europe are powering down or running at partial capacity.
These disruptions in global trade could grow more noticeable in the months to come, as consumers hoard products and countries clamp down on exports of medical supplies and even food. Shoppers may see more shortages of unexpected products, including laptops, toilet paper and medicines. Some companies could find themselves lacking raw materials and components, a recipe for further financial trouble.
At the White House on Friday, President Donald Trump said he was allocating at least $16 billion to American farmers, ranchers and agricultural producers to keep the U.S. food supply stable.
“In this time of crisis we must keep our supply chains moving from the beginning, right from beginning to end,” he said.
On Wednesday, the U.S. put its own export restrictions on medical supplies needed to fight the virus, echoing bans in Europe, India, Turkey and elsewhere that critics have said could leave some parts of the world short.
In livestreamed remarks that morning, Roberto Azevedo, director general of the World Trade Organization, said the contraction in global trade this year would be “ugly,” representing the sharpest decline in international commerce in a gener
ation. The WTO is forecasting that global trade volume could shrink between 13% and 32%, or even more, compared with the previous year.
“We project that trade in 2020 will fall steeply in every region of the world and basically across all sectors,” Azevedo said.
Global trade growth had already slowed last year to its lowest level since the financial crisis, bogged down by a trade war between the U.S. and China and slowing economies in Europe and Asia.
But the pandemic has slammed the brakes on various segments of global trade. Container volume in Shanghai, the world’s busiest port, fell 20% year over year in February, while cargo volume sank 23% at the port of Los Angeles in the same time period.
Earlier this year, much of that collapse stemmed from disruptions in goods coming from China, where many factories were locked down. That has particularly affected industries like electronics and industrial machinery, which rely heavily on factories in China to power global supply chains. Laptop exports from China to the U.S. have plummeted, for instance, just as demand is surging as companies switch to remote work and students are thrust into distance learning.
But like the virus, which spread from China to the rest of the world, so too will the economic disruptions, which are likely to intensify in months to come. For companies and consumers who have come to rely on being able to ship goods rapidly and seamlessly around the world, the disruptions could come as a shock.
“China has shown us how extreme the downturn in industrial activity can be,” said Chris Rogers, a global trade and logistics analyst at Panjiva. He said that seaborne shipments from China to the U.S. were down 45% in the first two weeks of March compared with the same period a year earlier.
For the last several months, factories in China have been slowly coming back to life, though many are still operating at partial capacity and could be shut down if the virus resurfaces. But while Chinese factories recover, demand for many products is cratering elsewhere.
Those places include the U.S. and Europe, where demand for goods and services is falling as workers lose jobs and cut spending, leaving American businesses scrambling to cancel orders from China.
Around the world, factories are shuttering for a variety of reasons. Workers are quarantined or staying home to care for children who are out of school while some factories lack components and raw materials. Others simply have no need to manufacture products because no one is buying them.