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Coronavirus could impede U.S. trade with China, experts say

By Jessie Higgins
The Chinese government has instituted a forced holiday for all factories while officials try to contain the coronavirus, which could decrease that nation's imports and exports. File Photo by Stephen Shaver/UPI | <a href="/News_Photos/lp/036d37c8d99e80149b66895613e938eb/" target="_blank">License Photo</a>
The Chinese government has instituted a forced holiday for all factories while officials try to contain the coronavirus, which could decrease that nation's imports and exports. File Photo by Stephen Shaver/UPI | License Photo

EVANSVILLE, Ind., Feb. 3 (UPI) -- The spread of the coronavirus through China is raising concern among American shipping ports and industries that rely on trade with the world's most populous nation.

The Chinese government has forced factories and businesses to close to slow the spread of the disease. There is no telling how much the virus will impact China's consumer demand, even after the forced holiday ends.

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"One of the things we're hearing is that it's possible some of their factories may remain closed until the virus is contained," said Noel Hacegaba, the deputy executive director for the Port of Long Beach in California. "That means marine cargo won't be moving. It won't be leaving China. It won't flow into the United States."

That also means China will not receive American goods, Hacegaba added.

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Typically, agricultural products -- like soybeans -- are the most frequent items shipped through the Port of Long Beach, Hacegaba said. Other leading exports to China include aircraft, machinery, electrical machinery, medical instruments and vehicles, according to the Office of the United States Trade Representative.

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The disruption comes at a time when industries were expecting trade with China to pick up. President Donald Trump and Chinese government leaders on Jan. 15 signed a phase one trade deal -- the first step toward ending an 18-month trade war between the two countries.

As part of the deal, China promised to purchase $200 billion of American goods, including $40 billion in agricultural products. Such purchases would offer relief to U.S. businesses, like soybean growers and other agricultural interests, that have seen demand fall and prices plummet during the trade war.

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"Anything that can impact China's ability to make these commitments is something we should pay attention to," said John Newton, chief economist at the American Farm Bureau Federation.

Newton said it was too soon to speculate on how much the coronavirus will impact agricultural trade in the coming months. At the federal level, for example, agencies still are assessing the situation.

As U.S. Commerce Secretary Wilbur Ross "made clear, the first step is to bring the virus under control and help the victims of this disease," a Department of Commerce representative said in an email.

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"It is also important to consider the ramifications of doing business with a country that has a long history of covering up real risks to its own people and the rest of the world. Fortunately, the Department of Commerce is equipped to support the American people and our businesses to do both."

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The Chinese government mandated that all factories remain closed until at least the beginning of this week. Other provincial governments have extended the forced holiday until Feb. 10, said Rajiv Biswas, the Asia Pacific chief economist at IHS Markit, a global analytics and information company based in London.

Factories already were closed last week for the Lunar New Year celebration, Biswas said.

"There will be a big impact on trade because of the long period of forced holiday," Biswas said. "The next question is, how will this impact demand in China?"

In the immediate future, the factory closures will reduce China's demand for imported materials because plants that aren't operating won't need supplies, Biswas said.

The longer term impact is less clear. So far, the rapid spread of the disease has dramatically slowed commerce in China, he said.

"It's escalating so rapidly," said Biswas, who is based in Singapore. "There is a great deal of fear because there is not a good understanding of how to contain it. Now, because people are in this state of fear, they don't want to go out. They're staying home. They won't be buying as many things."

It is too soon to tell what markets will be most affected, Biswas said. A lot depends on how quickly the virus spread can be contained. Work is underway on a vaccine, but how soon one could be developed is not known.

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"Even if they have a vaccine, it would take months to actually produce enough vaccines for the whole country," Biswas said. "China has 1.3 billion people. The logistics of creating a vaccine to that kind of scale is immense. I don't think this can be stopped anytime soon."

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