The effects of the Wuhan coronavirus could end up being far more widespread than the illness itself. It is already affecting China’s economy, potentially to the tune of $60 billion.
Other predictions are even less optimistic, suggesting that if the outbreak isn’t rapidly contained, Chinese banks could face a $6 trillion disaster.
And the fallout won’t stop with China. The United States and China are intimately linked economically. The coronavirus outbreak could directly affect our economy, as well as the availability of many essential products that are made in China.
How the Wuhan coronavirus outbreak could affect economies
Zero Hedge reports that it has “all the hallmarks of a true Black Swan event.” If you’re not familiar with that term, it is a market-related term that describes a severe and unexpected event that cannot be predicted beforehand but could potentially cause catastrophic damage to the economy. (You can learn more about the term “black swan” here.)
A report on GnS suggests that it isn’t just the US and China that could suffer economically. Tuomas Malinen writes that this could trigger a global economic catastrophe.
The first shoe to drop outside China is likely to be the export-and China-dependent Eurozone. And, as we have warned on several occasions, many European banks will be unable to withstand a recession (see also Q-Review 3/2019 and Q-Review 4/2019).
When the European banking crisis, driven by the ensuing recession, resumes it will “go-global” fast as Europe holds the biggest concentration of globally systemically important banks, or G-SIBs.
It is also unlikely that hyper-valued U.S. stock markets will be able to endure the impact of a global recession. This is even more the case if the Fed tapers its term repo-operations in February, as planned.
Global recession, a European banking crisis and a crash in the U.S. capital markets will produce a global economic collapse which will almost certainly overwhelm any attempts—massive and coordinated as they may be—to turn the tide by over-stretched central banks and over-indebted governments.
This is, why the coronavirus outbreak should be treated for what it is: a potential harbinger of human and economic calamity. (source)
Currently, at least, global stocks are rising in optimism of a slowdown of the spread of the virus, but the Federal Reserve is monitoring the risk of economic disruption.
What does this mean for us?
All this market stuff is a whole bunch of big numbers that don’t feel very personally relatable. But that doesn’t mean we won’t suffer financially as a result of the outbreak.
Getting down to nuts and bolts, how will this affect us here in the United States personally? There are a few different ways.
First of all, we import a crapton of stuff from China.
The cost of goods could go up as China attempts to recover from its own economic crisis.
The availability of goods could decrease since 400 million people are currently locked down in China. It’s a pretty safe guess that manufacturing is not ticking along as it has been in the past.
And it goes even deeper than that. Even products that are “made in China” have components that are made in the United States. A lot of the research and development is done in the states, and of course, the retail aspect also takes place here. In fact, 56% of what you pay for an item “made in China” goes to American workers and businesses.
And with the latest news that the virus can live up to 9 days on surfaces and that the actual incubation period is 24 days and not 14, well, bringing stuff in from China no longer seems like such a great idea now, does it?
So you can see how the ripple effect could cause a lot of problems on our side of the ocean.
Here are the products we currently import from China
Last April, the US and China were involved in a trade war that resulted in tariffs being added to products we were importing from China. At that time, my friend Marilyn Matthews compiled a very thorough list of the products that could see a price increase due to import tariffs.
That list is useful today in that we can use it to predict the products that could soon increase in price, be in short supply, or even be completely unavailable. You can use this list to foresee the things that could become a problem. Some things you could stock up on – like medications – but others are items you won’t know you need until you actually need them – like parts to repair your furnace.
- Tires, tire retreading products, all rubber products including but not limited to stoppers, caps, lids, hoses, belts, tubes, pipes, etc. This will affect everything that rolls or is contained.
- Antifreeze and de-icing fluids
- Iron and iron alloys and steel products
- Aluminum and alloys
- Nuclear reactors and parts
- Central heating units and parts, furnace burners and all parts, furnaces, ovens, and water heaters,
- Turbines of all kinds, combustion piston engines, ignitions, compressors
- Hydraulic engines, pneumatic engines, turbo engines
- Pumps of all kinds
- Machinery for food production commercial and home use
- Papermaking and bookmaking, anything printed
- Cartons, boxes, containers for mailing and shipping
- Textile machines, any and everything to do with needlework of any kind in textiles
- Metalworks: Anything to do with machinery involved in this industry, drilling, milling, grinding, smoothing, shaping, punching, polishing, etc.
- Woodworking machinery of any all kinds
- Cast iron parts and products
- Chainsaws and parts
- Cash registers
- Anything to do with computers, electronics, magnetic storage, whole or in parts
- Medical devices
- Car computer components,
- Concrete mixers
- Earthmoving, crushing, grinding, and sorting machinery of all kinds
- Glass optic machinery
- Assembly machinery of all kinds
- Vacuum molding machinery
- Thermoforming machinery
- Rope and cable manufacturing machinery, both metal and fiber
- Floor polishers,
- Trash compactors
- Ball bearings
- Electric motors
- Generators of all applications from large to small
- Lab equipment for all applications
- Broadcast equipment
- Safety control equipment (flight record data box for example)
- Railway and shipping equipment of any and all types
- Motor vehicles of all kinds. If it rolls it’s on the list.
- If it flies it’s on the list as well as the parts to repair or assemble
- If it floats it’s on the list.
- Satellites of all kinds and all parts
And it isn’t just mechanical goods and electronics. A large number of medications and medical supplies will be affected:
- Coenzyme Q10 (ubidecarenone) heart health supplement increases oxygen
- Quinone drugs including Malaria testing kits
- Aromatic drugs derived from carboxylic acids with additional oxygen function, and their derivatives
- Amfetamine (INN) benzfetamine (INN), dexamfetamine (INN), etilamfetamine used to treat ADHD, hyperactivity, narcolepsy, athletic performance and cognitive enhancer
- antidepressants, tranquilizers and other psychotherapeutic agents, monoamine drugs
- cardiovascular drugs of amino-compounds with oxygen function
- dermatological agents and local anesthetics
- oxygen increase breathing drugs for cardio patients and asthmatics
- Anesthesia drugs
- Thyroid drugs, hormone drugs
- TB drugs
- Anti-malaria drugs
- Immunological products and drugs
- Vaccines for human medicine
- Vaccines for veterinary medicine
- Human blood; animal blood prepared for therapeutic, prophylactic, diagnostic uses; toxins, cultures of micro-organisms
- Diabetes drugs, testing strips, syringes
- Asthma drugs
- Ephedrine, pseudoephedrine, norephedrine – vasodilators
- Other medications containing alkaloids or derivatives
- Medicaments containing vitamin B2 synthesized from aromatic or mod. aromatic compounds, in dosage form or packed for retail
- Medicaments containing vitamin B12 synthesized from aromatic or mod. aromatic compounds, in dosage form or packed for retail
- Medicaments containing vitamin E synthesized from aromatic or mod. aromatic compounds, in dosage form or packed
- Adhesive dressings and other articles having an adhesive layer, coated or impregnated with pharmaceutical substances, packed for retail
- Triethanolamine will affect surfactants (any detergent), emulsifiers, and cosmetics
- Sterile surgical catgut, suture materials, tissue adhesives for wound closure, laminaria, laminaria tents, and absorbable hemostatic.
- Algins used as thickening or stabilizing agents in foodstuffs and other products.
- Drugs used to dilate the cervix
- Blood-grouping reagents – medical blood tests
- Opacifying preparation for X-ray examination; diagnostic reagent designed to be administered to the patient such as Barium for GI series, dyes, and stains for other radiologic tests
- Antigens or antisera antiserum. A serum containing antibodies that are specific for one or more antigens. Also called immune serum. Human or animal serum containing one or more antibodies that are specific for one or more antigens and are administered to confer immunity.
- Thorium – coats tungsten filaments used in old-fashioned light bulbs, TVs, electronics, etc.
- Dental cement and other dental fillings; bone reconstruction cement
- Chemical contraceptive preparations based on hormones or spermicides, birth control
- Gel preparation use human/veterinary medicine lubricant in surgical operations, physical exam, or coupling agent between body & medical instrument, such as KY Jelly
- Appliances identifiable for ostomy use
That’s a whole lot of stuff – and much of it is incredibly vital, like medications, medical supplies, and essential components of things that we use every day.
It’s impossible to say whether the items in the list above will become unavailable, just like it’s impossible to truly predict how far and fast the Wuhan coronavirus will spread. Like the virus, we just don’t know enough yet and the situation is rapidly evolving.
If nothing else, your awareness of the possible economic and supply ramifications is a tool in your arsenal. Preparing for the economic fallout is just as important as preparing for the virus itself.
You won’t be caught totally by surprise like most of the other folks in this country. At this point, 2020 has certainly been full of surprises. It would be difficult not to wonder with a certain amount of dread, what’s next?
Article written by Daisy Luther for The Organic Prepper