China’s Coronavirus impact on U.S. imports & exports

There is a growing threat of disruptions to U.S. imports and exports as the spread of the Coronavirus moves from the Wuhan epicenter to other parts of China, a University of Minnesota supply chain expert warned.

In an interview with AJOT, Karthik Natarajan, assistant professor of Supply Chain and Operations at the Carlson School of Management at the University of Minnesota, said that companies and consumers in the United States should expect to see the impact of the Chinese public health crisis on U.S. trade with China in three areas:

Inspection: “Officials who are necessary to perform a variety of inspections for imports and exports may not be available, resulting in product slowdowns in the infected areas.”

Transportation: “The lockdown in the Wuhan area means that inputs and finished goods are now being slowed down or stopped, impacting U.S. imports and exports.”

Human Resources: “The areas in China which are subject to quarantines and lockdowns will result in employees being unable to go work, which will further slowdown the supply chain process for imports and exports.”

Natarajan specializes in global health supply chains. He works with global health organizations and has several ongoing projects related to improving the efficiency of global health supply chains and increasing the availability of essential health commodities in developing countries.

He noted that many shippers and carriers had made advance shipments to and from China in anticipation of a slowdown in economic activity during the Chinese New Year holiday that has just ended.

Overall, he said: “We are starting to see disruptions spread across the supply chain in China. However, in the near-term U.S. companies will be able to source their products from other suppliers in China or from other suppliers in Southeast Asia and so the impact will not be dramatic. In addition, many companies have multiple sources for their products and may not be impacted at all.”

The danger is “if the virus spreads to the coastal cities of China, resulting in a partial or complete shutdown there…then, it will be serious.”

He noted some product disruptions possibilities:

Drugs: The pharmaceutical industry could be impacted soon: “Many drugs are made in India but they rely on some ingredients from China. If the virus continues to spread, we could see disruptions in the supply of drugs consumed in the United States.”

Medical Devices: “There are some medical devices made in China that may be impacted if the virus worsens.”

Face Masks: “The 3M company is a major supplier of face masks used to protect against infection. They have announced that they are going to ramp-up production. This will not happen overnight and so China is likely to experience shortages until that ramp up can take place. This means that other parts of the world may experience shortages as the demand is addressed in China.”

Outlook for the United States: “The Centers for Disease Control (CDC) has been very proactive in placing people who have been infected by the virus into quarantine and so the short-term effect in the United States is not worrisome. I would not expect to see any immediate impact on U.S. truck or air transportation …but that could change.”

Conclusion: “It is still too early to tell how serious impact of the virus is and the consequent impact on the supply chain. We are probably 2-3 weeks away before we have a clearer picture.”