Effects of Coronavirus over International Trade

The ongoing spread of the new coronavirus (COVID-19) has become one of the biggest threats to the international trade and financial markets. China is the main country where the majority of the confirmed cases of this virus. More than 80,000 infected people have been reported in the country until now.

It is inescapable that the new coronavirus epidemic will have an extensive impact on international trade and society.  Moreover, it’s a worrying effect on human life; the new tension of coronavirus has the possible to extensively slowdown not only the Chinese financial system but also the international economy.

China has become a fundamentally developed hub of many international trade operations. Any interruption of China’s productivity is probable to have repercussion in a different place through regional and international value chains.

China has become the main provider of intermediary inputs for developed companies overseas. As of today, about 20% of international trade in manufacturing transitional products originates in China.

Impact on International Trade

The current integration of China in international trade across the sectors as considered by the GLI. All through the last two decades, China has become fundamental to the international trade and industry. The rising importance of China in the international economy is not only connected to its status as a producer and exporter of consumer products.

China’s gross domestic product (GDP) development saw the largest reductions in terms of importance, according to the report. The Asian trade and industry giant (China) is predictable to produce by 4.9% this year, slower than the former forecast of 5.7%, according to OECD.

Meanwhile, the international economy is expected to grow by 2.4% in 2020, down from the 2.9% projected earlier, said the report.

Slump in Oil Prices

A reduction in global economic activity has lowered the demand for oil, taking oil prices to multi-year lows. That happened even before a disagreement on production cuts between OPEC and its allies caused the latest slump in oil prices.

Analysts from Singaporean bank DBS said reduced oil demand from the virus outbreak and an expected increase in supply are a double whammy for oil markets.

Decline in Stock Market

The sharp decline in international stock markets over the past 10 days of March 2020 is a shocking warning about the state of the international economy. It also creates some very difficult questions for the community invested in the stock market that are at or close to their retirement.

But for the majority of people who are years or decades away from retiring, nothing about a sharp downturn should scare you off from investing. If anything, the low prices usually mean it’s a more favorable time to buy. That’s not to say you should get obsessed with trying to time the market. But often the worst thing a typical investor can do is sell.

Having stocks on the brain means it’s a good time to take a close look at your household budget and see if it’s at all possible to increase the amount of money.

The full effect of COVID-19 on global value chains will become clearer in the coming months. However, one question importance is how a disruption in Chinese supply of intermediate inputs will affect the rest of the world. Based on the analysis of this note, two key points can be made. The estimated international effects are subject to change depending on the containment of the virus and or changes in the sources of supply.