The Trade War and the Coronavirus

China’s coronavirus has proven deadly, and it has taken over a thousand lives. However, there is another somewhat overlooked consequence of this terrible virus. China is a major exporter of consumer goods of every type, such as electronics, fashion accessories, and toys. Since the virus, trade freighters are stranded at Chinese harbors. They are refusing to enter China, leaving the rest of the world in desperate need of many commodities.

Western companies such as Hasbro, Inc., and major designers such as Michael Kors, Versace, and Jimmy Choo find themselves unable to meet customers’ demand for goods. In addition, companies that sell goods to Chica are eager to be released from their trade agreements. The situation is getting worse every day as normal global trade is being upended.

Hundreds of millions of traders are simply refusing to deal with or go to China. One shipment of needed commodities can be worth millions. Ships are no longer loading or unloading goods. Thus far, more than 27 ships have refused to trade during the month of February. More than half a million 20-foot shipping containers are currently sitting idly. If a single container is valued at $1,000, shippers have taken a loss of $600 million in just one week. The demand for containers has dropped significantly from last year.

Car manufacturers are being affected, as well. Hyundai Motor Co. has had to cease production of some of its cars that require parts being imported from Serbia. Shippers are unwilling to trade with China at this time. Chrysler NV in Serbia is ceasing operations because they cannot obtain needed parts from China.

Airlines have temporarily stopped flights to China. Even when flights resume, there is every chance that demand will be considerably lower than in the Fourth Quarter of last year. This will hurt the bottom line of many airline companies.

The need for coal and iron has dropped as a result of delays created by the coronavirus. The huge freighters that usually transport these two commodities are now taking in less than $2,500 on a daily basis. This doesn’t even come close to paying the crews.

The United States and China were already engaged in a trade war prior to the coronavirus, as each country imposed billions of dollars of trade tariffs on the other. This virus could very well intensify the trade war again between the two countries.

The United States, as well as other countries, are now exploring the possibility of greater diversification from China. But more than likely, the United States and China will continue to trade. Their economies have become dependent on each other. This dependency is unavoidable. China has a 12 percent share in all global trade. That means many countries have become dependent on Chinese goods.

How worried are United States companies? The United States is accustomed to dealing with obstacles. Secretary of Commerce Wilbur Ross has indicated this would be a good time to bring back some overseas jobs to the U.S. ″I think it will help to accelerate the return of jobs to North America. Some to the U.S., some to Mexico as well.”
In January, the United States and China entered into trade agreements that committed China to purchase $200 billion worth of American goods. With the coronavirus causing global havoc, agreements have taken a step back. How will this play out in the future?

China and the U.S. have been vying for trade superiority. The trade war has just escalated.