As the world closely follows the news of the coronavirus outbreak in China, economists are tracking what impact it will have on global trade.
The short answer: It will depend on the severity of this disease.
As of Feb. 9, the World Health Organization reported 812 deaths from the respiratory virus with close to 38,000 confirmed cases across the world, including the United States, Australia and Japan.
The effects of the outbreak are being felt on the global economy as factories are shut down, travel restrictions are imposed and the demand for goods and services decline. The longer the virus remains a significant risk and China maintains travel restrictions, supply chains and global commodity prices will be affected.
From a Canadian perspective, our goods exports, including agricultural products, seafood and lumber products, to China totaled about $24 billion in 2019. The longer and more widespread the virus becomes, the more it poses a risk to the EDC Economics outlook for Canadian exports and overall growth.
Impacts on Canada
Canadian exports, including airline travel, tourism, seafood and pork, have already been negatively affected by the coronavirus. These export sectors were expecting increased demand from China for goods and services for its Lunar New Year celebrations, but with the outbreak of the virus, holiday closures were extended, and travel was suspended.
As the contagion has grown, so have concerns about the immediate impact on China’s economy. This has resulted in global commodity prices—including oil prices—falling as markets brace for decreasing demand and a soft start to the first quarter of 2020. This hit to prices is increasing the challenges and reducing revenue for Canada and other oil producers.
For other Canadian sectors, the effect will take longer to set in. The interconnected nature of global supply chains means that as the virus persists and keeps factories, ports and airports closed, the costs will extend into more industries. Given the information we have now, it’s too early to predict the extent of the effects of the coronavirus.
EDC will be closely monitoring developments in China and continue to keep Canadians informed of any impacts to global trade. We strongly advise anyone looking to travel on business to check with Global Affairs Canada for up-to-date travel advisories and restrictions.
Export Development Canada is a financial Crown corporation dedicated to helping Canadian companies of all sizes succeed globally. As international risk experts, we have the trade knowledge, financing and insurance solutions, and connections to grow your business with confidence.