How far down can the coronavirus drag the global economy?

It’s been just over two months since symptoms of the deadly coronavirus were first reported in Wuhan, China.

Yesterday, the death toll exceeded 1,000. Two-thirds of international flights from China have been cancelled. Chinese citizens are experiencing a wave of racism, just as they did during the SARS outbreak. Chinese businesses are suffering – at home and around the world.

And when Chinese business suffers, all business suffers.

China is the second-largest economy in the world, and the top trading partner of dozens of countries. Manufacturing accounts for 40% of China’s $14 trillion USD GDP. China is an export economy, meaning it ships more goods to the rest of the world than it brings in – from clothing to chemicals, to cars, to phones. Half the world’s LCD screens are made in China.

When the coronavirus forced China to shutter factories last week, it had a ripple effect on the global economy. Big Tech is taking perhaps the hardest hit. iPhone assembly lines are standing still. The supply chain of parts for most of the world’s consumer electronics is in tatters.

The auto industry is also feeling the crunch. Almost every major car manufacturer’s Chinese factories are on standby. A Nissan plant in Japan was forced to shut down because it couldn’t get parts from China. Plants in Italy and South Korea are under similar threat.

Even our national sport is suffering. Bauer Hockey, which was founded in Kitchener, makes all of its custom hockey sticks – the type used by NHL players and other pros – in a factory in China. It has been closed since the end of January.

As of writing, workers are starting to return to work. After a week in low gear, countrywide production is revving up again. But the biggest economic damage may still be to come. The domino effect of disruptions in the supply chain will be felt for weeks.

Gerrit Schneemann, an analyst at IHS Markit, spoke about this concern. “In the long term, the recovery of the supply chain will take a longer time, which will affect not only China and Asia-Pacific, but also the global supply,” he said.

Furthermore, many cities are imposing mandatory two-week quarantines for those who have passed through areas with coronavirus outbreaks. That means many are unable to work across jurisdictions.

“It’s like Europe in medieval times,” said Jörg Wuttke, the president of the European Chamber of Commerce in China, “where each city has its checks and crosschecks.” That comparison evokes a grim reminder of another European reality of that era: the Plague.

As the New York Times writes, “it is becoming increasingly clear that restarting China — the world’s largest manufacturer and a titan of global trade — would be difficult even if the country made major strides in the next few days toward containing the outbreak.”

And if the outbreak isn’t contained?

“A severe pandemic would resemble a global war in its sudden, profound, and widespread impact,” wrote the World Bank in a 2013 report. The longer people stay home – not travelling, shopping, or working – the weaker the demand for consumer goods. It’s no secret that consumption is the engine of the economy. Oh, and China.

One bright side for business is that online entertainment is booming as a result of the quarantine. As millions of Chinese stay home from school and work, video games and social media companies are seeing record engagement rates.

Not that it’s anything to celebrate.