The Coronavirus and Deglobalization

We cannot rule out that some world leaders intend to drastically reduce international trade, immigration and air travel in the name of health and public interest.

There is almost no doubt that the coronavirus has become a pandemic. Along the way, it is affecting geopolitics as well as domestic policies in countries around the world. It is also slowing the global economy.

The speed of global contagion and the political and economic changes caused by the new disease is a reminder of the level of globalization in which we live. The global exchange has been quite beneficial, but the rise of the unexpected virus is pushing the world toward deglobalization.

The most obvious evidence of this phenomenon is the decline in the economic activity of China and other countries. China, the world’s second largest economy, is also the world’s factory, and has had to close production centers and other businesses to control the disease. Given global supply chains, this has affected production in other countries, which have also had to reduce their productivity, because they cannot depend on their trading partners in China.

Countries as diverse as South Korea and Italy are taking similar health measures, hitting the global economy even further. The United States and other rich countries have cancelled events; reduced domestic and international travel; closed schools; reduced the use of services, such as restaurants; and a certain part of the workforce will probably not go to their workplaces. There are also other effects that will reduce economic activity. Markets are collapsing, because a recession is possible.

The coronavirus is reducing trade, investment and the international movement of people. In addition, there are few measures that governments can take to counteract the economic effects. Last week, the U.S. Federal Reserve reduced interest rates, but that will do nothing to rebuild global supply chains and little to stimulate demand. In fact, interest rates are so low that there is little that central banks can or should do, especially since they have been using this type of policy for more than 10 years.

Fiscal policy is also a limited tool, especially in the many rich countries that suffer from public debt and high fiscal deficits. Meanwhile, there is still high uncertainty about the coronavirus, itself, the epidemiology of which is still being learned, and uncertainty about the policies countries will implement. The sudden oil price war between Saudi Arabia and Russia, for example, is due to the low demand for the resource in Asia (due to the coronavirus) and the lack of agreement between these two countries on their production quotas.

Of greater concern, however, are the possible anti-globalization steps that populist leaders like Donald Trump may take as the crisis worsens. We already know that Trump does not like international trade and especially international trade between the United States and China. That is why the U.S. imposed tariffs affecting hundreds of billions of Chinese imports. Trump doesn’t like immigration either.

We cannot rule out that Trump and other world leaders intend to drastically reduce international trade, immigration and air travel in the name of health and public interest. For a large part of the public in rich countries, the coronavirus pandemic will confirm that we must be afraid of foreigners, distrust international trade and give priority to nationalist policies. For them, it will not matter that the benefits of globalization far outweigh the costs.

The best action for governments to take is to address the public health problem represented by the coronavirus, without turning an economic downturn into the beginning of sustained deglobalization.

About this publication

About Patricia Simoni 190 Articles
I began contributing to Watching America in 2009 and continue to enjoy working with its dedicated translators and editors. Latin America, where I lived and worked for over four years, is of special interest to me. Presently a retiree, I live in Morgantown, West Virginia, where I enjoy the beauty of this rural state and traditional Appalachian fiddling with friends. Working toward the mission of WA, to help those in the U.S. see ourselves as others see us, gives me a sense of purpose.

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