It’s no secret the coronavirus has people on edge. The fast-spreading respiratory illness has infected over 97,000 people worldwide, spurring medical mask shortages, empty grocery stores shelves, and all around uncertainty. Even further, the virus has exposed just how delicate the world’s global supply chain really is, with each country’s economy interdependent on the others. Ultimately, the lasting effect of COVID-19 won’t be measured by how many people caught it, but by how disruptive it was to our global economy.
With China being the epicenter of the illness, there is reason to be concerned. The world’s second largest economy accounts for a quarter of the world’s manufacturing output – including iPhones, cars from most major companies, and even President Trump’s clothing brand (the irony isn’t lost on that one). In today’s modern world, production chains are spread across different parts of the world – from China to Mexico. Toyota, for example, relies on over 2,000 suppliers to create its cars. The Brookings Institute likens today’s modern global supply chain as “complex systems,” that “tend to exhibit nonlinearity, chain reactions, and feedback loops, which make it difficult to predict how changes to any given unit will impact the broader system.”
If one major link in this complex global system can’t meet demand, it would be virtually impossible for other countries to make up the difference. And stock markets across the world are realizing it. Fear of the virus spreading resulted in the worst week for the U.S. stock market since the 2008 recession.
And it’s not just the newest iPhone that would be hard to get your hands on, it’s also vital prescription drugs people rely on.
China is the largest producer of active pharmaceutical ingredients, helping make important drugs including cholesterol and diabetes management medications. Its disrupted manufacturing output has the United States’ Food and Drug Administration and the European Union’s European Medicines Agency bracing for potential shortages. A report by Axios says 150 prescriptions could face shortages if the outbreak in China worsens.
“The FDA has been closely monitoring the supply chain with the expectation that the COVID-19 outbreak would probably impact the medical product supply chain, including potential disruptions to supply or shortages of critical medical products in the US,” FDA commissioner Stephen Hahn said.
The biggest question that still remains is how to keep supply chains from being disrupted further. Globalization in today’s age means the concept of “borders” are really only physical in nature. Trade, manufacturing, and technology have made it so that each country is dependent on others for a variety of reasons, from having diverse grocery store shelves to the most cutting-edge technology. If one thing is certain, it’s that the coronavirus has exposed just how vulnerable the world’s complex system is. The real question is what we do next to solve it, and prevent it from collapsing completely.