Coronavirus (COVID-19) Poised to Damage Wisconsin Economy
The outbreak of COVID-19 in Asia is growing, alongside the threat the virus poses to the Wisconsin economy. According to the most recent reports, cases of the deadly virus have risen dramatically over the past several days. In China, the “official” total cases have reached 76,936, with 2,444 dead, 11,477 in serious conditions, and another 5,365 suspected cases. In South Korea, the number of infected had jumped to 602, with 6 fatalities, and 7 in serious condition. In Japan 146 have tested positive, but this does not include the numbers from the Diamond Princess. The cruise ship, which is increasingly becoming a plague ship, is reporting a whopping 691 confirmed cases and 3 deaths. If the outbreak continues on its current track, or even escalates, it could have severe ramifications for the industries in Wisconsin.
Wisconsin as a state has done well in the past few years. In 2016 the GDP of the state was over $348 billion according to U.S. Bureau of Economic Analysis. At that level, Wisconsin ranks as the 21st largest state economy in the US. This GDP was calculated using the formula GDP = C + I + G + (X – M), or GDP = household consumption + investments + government spending + (exports – imports).
Whether Wisconsinites like it or not, the Wisconsin economy is linked to that of the Asian region. Wisconsin unsurprisingly imports the most from China out of all its foreign business partners, but China is also the 3rd largest buyer of exported goods. Below is the top 15 Asian countries that trade with Wisconsin, and what their total import and export values are.
An astute reader will notice that the import totals are larger than the export totals, which counts against the Wisconsin GDP figure. What is important to note, however, is how these number are going to be impacted by COVID-19 Notably, how the export value will go down, and the import value will go up or pressure other parts of future GDP calculation.
China, in response to the outbreak has put the breaks on its economy. Hundreds of millions are on lockdown, and many factories have been shut down by govt. decree. Of the few factories that are cleared, they are having trouble restarting. In one instance, only 1/3 of the employees at a factory were able to avoid the lockdown and go to work. As the virus spreads throughout Asia, we can expect similar instances to occur. On the face of things this sounds like a win for domestic U.S. industry as Asian competitors are now under pressure, but in fact the opposite is true.
As the Asian economies slow because of the virus, they will no longer be in a position to buy Wisconsin goods, (the top 3 international Wisconsin exports are Industrial Machinery, Electrical Machinery, and Precision Instruments.) Meaning Wisconsin exporters will find is harder to sell their goods abroad. As Asian factories shut down, importers will struggle to buy what they need for their businesses, and if they do, they will pay a higher price. Meaning that importers will struggle to maintain their business if the import is only made in an effected Asian country, or will pass on the cost of higher cost import to consumers. If the disruption goes on too long or spreads too far, employee layoffs and shutdown of Wisconsin business are almost certain.