China has started taking preventative measures, severing transportation access to and from transport hubs and cities such as Wuhan. Dozens of freight and commercial airlines have followed suit, cancelling international flights to and from the country. The question of how trade and production gets done – and with whom – still looms. It’s a question that carries great urgency both within and beyond China’s borders, impacting a vast number of verticals.
Cathay Pacific, a major cargo airline for China and Hong Kong, has said it will reduce flights to mainland China by 50 percent until the end of March. Many are wondering if this might have a ripple effect in driving up prices to firms (and their end consumers) as transport is disrupted. Against a backdrop where spread of the virus is accelerating and widening, it’s hard to deny that impact will most likely be felt eventually by consumers across the globe, if present trajectories continue.
Apple may be among the more visible companies to be impacted, as it takes hits to both its supply chain and its retail presence in the region. In a recent interview, Apple CEO Tim Cook stated there are suppliers in the Wuhan region, and that Apple was forced to close a few retail locations due to the recent outbreak affecting operations. “Many of the stores that remain open also have reduced operating hours,” said Cook. The company has alternative component sources, and according to the CEO is “working on mitigation plans to make up for any unexpected production loss.”
The coronavirus seems to have spurred companies to consider the possibilities of relocating and moving production facilities. The crisis has clearly begun affecting supply chains in many ways, and the virus may have cemented those plans, moving them from thought to action.
It takes time, as well as money, to shift supply chains, however. Assuming that in the meantime production is severely impacted to, say, auto firms, tech companies, and manufacturing, idle production in China means a disruption to U.S. production, overall, which then results in lost revenues.