A U.N. analysis of the global trade impact of the coronavirus epidemic finds nations have been hit with export losses of $50 billion in February, and the world should brace itself for worse to come the longer the epidemic lasts.
Over the past two decades, China has become the world’s largest exporter and supplier of key components for various products manufactured in many parts of the world. For example, automobiles, cellphones, and medical equipment depend upon the export of intermediate parts from China.
The U.N. Conference on Trade and Development (UNCTAD) reports China provides 20 percent of overall global production and trade in the manufacture of intermediate goods, making China a critical, integral part of the economies and global value chain across the world.
Pamela Coke-Hamilton is UNCTAD's director of the Division on International Trade and Commodities. She says there was a dramatic reduction in output in China last month as a direct consequence of the spread of the coronavirus. This amounts to a two-percent contraction in output on an annual basis.
“This will show that there is a ripple effect throughout the global economy and to the tune of $50 billion fall in exports across the world," she said. "If we look at what is occurring across the world now, and even with respect to China, we will no doubt realize that the fall may be continuing and this actually may be a conservative estimate.”
Coke-Hamiton says this also is likely to trigger a fall in the world’s gross domestic product. UNCTAD reports the economies that will be most affected by Chinese supply disruptions are the European Union, the United States, Japan, South Korea and Vietnam.
UNCTAD economists say the estimated global effects from a disruption to China’s value supply chain are dependent on the containment of the coronavirus in China and the rest of the world. If the COVID-19 epidemic persists for any length of time, UNCTAD says it is likely to result in a significant downturn in the global economy.