Supply Chain Disruptions From China’s Coronavirus Outbreak Could Affect US Manufacturing

China’s fast-spreading coronavirus outbreak could cause supply chain disruptions that may affect the manufacturing sector in the U.S., some experts say. However, Secretary of Commerce Wilbur Ross said such disruption could help strengthen alternatives and bring back jobs and manufacturing to the country.

Amid strong global pandemic fears as the deaths from coronavirus near 250 and infections inch towards 10,000, Daryl Liew of Singapore's REYL bank warned of imminent global supply chain disruptions. “The sharp action taken by the Chinese government to basically delay workers going back to work is definitely going to cause some supply disruptions,” CNBC quoted Liew, who is chief investment officer at REYL Singapore, as saying.

At least three Chinese provinces have barred businesses, other than some essential industries, from resuming work before Feb. 10 after the extended Lunar New Year holidays. In Hubei province, whose industrial hub of Wuhan is the epicenter of the outbreak, resumption of local business has been delayed until at least Feb. 14, reports say.

There is a “big question mark” over how long the disruptions could last, Liew said.

World Health Organization (WHO) has declared a global health emergency in view of the outbreak.

A lagging indicator

The disruption has hit at a time when Chinese manufacturing numbers were showing signs of a reversal of the downward trend that dominated for the past several decades. “It’s a bit of a lagging indicator but the December ISM numbers have all been broadly positive, especially for Asian economies ... which suggests essentially that global trade is normalizing.” Liew said the indicators were not “bouncing back” but they were “rebounding.”

On Thursday, Shannon Saccocia, chief investment officer at Boston Private told CNBC that there was ground for concern that the overall impact on the Chinese economy could lend itself, from a sentiment perspective to concerns for the global economy. “If we start to see that upended by the fact that factories aren’t opening and … we’re not able to get the components … that could … certainly, slow any sort of manufacturing reacceleration that we were hoping for in the first two quarters of 2020.”

Meanwhile, Reuters reported that Ross told in a Fox Business Network interview that the disease would lead businesses to reconsider their supply chains. That could help quicken the pace at which jobs and manufacturing were returning to the U.S. from overseas, he said. “I don’t want to talk about a victory lap over a very unfortunate, very malignant disease,” Ross told Fox. “But the fact is, it does give businesses another thing to consider when they go through their review of their supply chain.”

President Donald Trump, who recently reached a first phase trade deal with Chinese President Xi Jinping after months of tit-for-tat tariff escalations, has vowed to bring back home jobs and manufacturing.