International Trade Specialist: Coronavirus Spells Trouble For U.S. Companies

Feb 27, 2020

U.S. businesses are battling wide-ranging problems amid the global spread of the coronavirus.

Chinese production lines are at a stand still, spelling trouble for companies that manufacture off-shore. Shipping to and from China is slowing dramatically and U.S. sales to China are suffering.

Jim Ryan is an international trade specialist with Bradley University's Foster College of Business. He said many companies, like Caterpillar and Komatsu, are shifting production to other countries like Vietnam, Indonesia and Thailand.

Jim Ryan
Credit Bradley University

"But now, with the spread of [COVID-19], it's kind of following them as they move production," he said. "In a matter of weeks, it's going to be an issue there."

Ryan said many large companies have contingency plans in place to deal with global crises.

“I think this harkens back to tsunamis in Asia and the downturn in 2009,” he said. “In many cases, there's pressure on their supply chain, but they have avenues to address it. They're going to be scrambling, but not as bad."

Small and medium-sized companies may not be as lucky, Ryan said, but they did catch somewhat of a break with the timing. He said companies tend to stockpile parts and products ahead of the Chinese New Year, anticipating delays in the processing of orders. That could help them weather the supply disruption.

"Globally, in most industries, they've been on the high side of inventory for coming up on nine months now, because of lower global demand — and a lot of that is due to uncertainty with our trade disputes,” he said. “So even that's good news: they're kind of going through stock they needed to get rid of, in most cases. But by and large, that pretty much ends now."

China isn’t only a major producer for U.S. companies, Ryan said. They’re also an important customer.

"That's kind of the double-edged sword,” he said. “Whereas we can kind of wait it out and plan around the supply chain, China doesn't have that ability. It's a foregone conclusion — they're going to take the brunt of this and they are not going to be buying as much of our products."

Ryan said it's too soon to tell how far down the road the virus outbreak will affect business.

"It's going to interrupt research and development efforts and that could very well end up delaying the introduction of next generation products in the U.S., particularly things like automotive and electronics,” he said. “There's long-term effects we haven't really seen yet."

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