Coronavirus will reverse globalization and create regional supply chains economists predict
Economists have predicted that the coronavirus crisis will fundamentally reshape global trade as companies look to reduce their dependence on Chinese manufacturing. In the report, which was published on Wednesday, the Economist Intelligence Unit (EIU) said that the pandemic will reverse globalization by accelerating a move toward regional supply chains.
Ever since China was accepted by the WTO in 2001, China’s dominance in international trade has grown. This event was credited by the EIU as sparking the latest wave of globalization. However according to the report’s author “as a result of Covid-19, it is likely that this period of globalization will not only come to a halt, it will reverse,” with the author also noting that the trade war between the U.S. and China alongside rising wages in China had already incentivized some companies to relocate supply chains away from China.
The report also suggests that the shift away from China would be indicative of a wider trend, as global firms looked for ways to build up their resilience following the supply shock induced by the coronavirus.
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China waives tariffs on 79 U.S. import categories
China has published a second batch of products to be exempt from US trade war tariffs. The exemptions will be effective from next week and last for one year. The list published on Tuesday by the Ministry of Finance states 79 products, which will be exempt from the tariffs. These include rare earth mineral ores, aircraft radar equipment, semiconductor parts, medical disinfectants, and a range of precious metals, chemical and petrochemical products. Importers in China will have to apply to the General Administration of Customs within six months of the announcement to be considered for waivers, which are effective from May 19.
This second wave comes after the first batch of tariff exclusions were announced in September 2019 and included major agricultural commodities such as soybeans and pork, as well as petrochemical products. The announcement comes after U.S. President Donald Trump last week threatened to end the phase one trade deal, which was signed in January, should China not increase its imports of US goods, as per the purchasing agreement element of the deal.
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Maersk expects consumer shipping volumes to fall up to 25%
The shipping company Maersk expects container volumes to fall up to 25% this quarter with plans to cancel dozens of sailings. The Danish shipping giant, which moves 17% of all containers worldwide, has posted better-than-expected first-quarter earnings on Wednesday as cost cuts, lower fuel outlays and higher freight rates helped offset the demand slump in consumer and industrial markets from the coronavirus pandemic lockdowns. However, the effects of the coronavirus continues to affect the industry.
Although many U.S. and European countries are trying to carefully reopen their economies, Chief Executive Soren Skou said he expects “no meaningful recovery until the end of the year.” He also added that container volumes are expected to fall 20% to 25% in the second quarter from a year ago. The experiences of Maersk mirror many other shipping lines, who have cancelled hundreds of sailings on major trade lanes and idled ships to cut costs and maintain freight rates amid the declining demand.
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