Tuesday, April 14, 2020 : By David Brat, Liberty University’s School of Business
The coronavirus outbreak is proving President Trump right about the dangers of globalism. We simply cannot afford to be overly reliant on China.
After decades of rapid economic expansion enabled largely by one-sided concessions from establishment politicians in the U.S., China has become an undisputed leader in global manufacturing, producing around $4.6 trillion in industrial output as of 2016—nearly $1 trillion more than America.
The “made in China” label can now be found on virtually every consumer product on retail shelves, and Chinese-made components are essential for many other products as well, raising serious concerns about supply chain shortages amid the coronavirus outbreak that has shut down major portions of the Chinese economy.
While globalization efficiencies can act as a short-term stimulus for GDP, it invariably reveals its drawbacks in times of crisis. The first lesson in Finance 101 is “diversification.” Do not put all your eggs in one basket.
But our economic elites have ignored the basics for too long.
Americans clearly see the results of a disrupted global supply chain. The stock market, for instance, has been frustratingly erratic in recent days, mostly driven by uncertainty among investors worried about the impacts of coronavirus.
The Port of Los Angeles, the largest commercial seaport in the U.S., saw a whopping 25 percent decrease in traffic last month. Authorities attribute the decrease to the coronavirus outbreak, and estimate that the total container volume handled by the port during the first quarter of 2020 could be 15 percent lower than in 2019.
If more supply chains were located in the U.S., these effects would obviously fade.
One particularly poignant example of the dangers of placing a virtual monopoly supply chain under a communist regime is the current shortage of medical face masks.
China, the world’s largest manufacturer of such masks, is already struggling to meet the exploding global demand for the protective gear, leading to fears of potential shortages among the medical professionals tasked with treating coronavirus patients.