Steve Dittmer | Mar 05, 2020 BEEF Magazine

The human coronavirus, now called Covid-19, outbreak has sparked fear, concern and questions as world economies struggle to recover.

How dangerous is the human coronavirus, now called Covid-19, epidemic to the U.S. economy, the world economy and politically to the Trump Administration?

All of those questions are hard to even speculate on, given the fluid nature of the outbreak. China’s outbreak appears to have peaked. South Korea’s, Japan’s and Italy’s have not. Neither has the U.S. outbreak.

But the scale of the outbreaks outside of China are nowhere near as serious, at least in terms of the human toll. Economic consequences are still being tallied.

There are many countries whose manufacturing sectors rely on Chinese components to operate. There is no question that a couple months of little or no supply will affect at least the first quarter in many countries and globally. But to date, the Organization for Economic Cooperation and Development has projected only a slight drop in global GDP from earlier projections of 2.4% to 2.9%.

Related: How low will the “Corona Swan” swoop?

It seems hard to grasp, but the impact of China’s tourism on the rest of the world is substantial, amounting to roughly $250 billion a year; a quarter trillion dollars. It is easy to see that halved in 2020.

Political consequences

As for President Trump and the election this fall, it is likely the impact will be substantially less than the opposition party is hoping for. Trump has established a solid reputation for his handling of the economy, taxes and regulations, and much of the public seems to understand that the trade war with China dampened the economy in the short run.

It is risky to guess the market when uncertainty is paramount. The Federal Reserve cut the interest rate and the Dow dove 800 points. Evidently, investors are spooked, thinking the Fed expects the economy to be worse than they thought.

Markets, financial analysts and economists are speculating whether China’s government will put together a massive stimulus package to speed the recovery from the Covid-19 epidemic. I agree with the chief China economist at Nomura, a huge Japanese financial services and investment bank, who pointed out that a usual stimulus package, heavy on infrastructure spending and the government pumping money into the economy, is not targeting the problem.

The problem is a slow resumption of production, not demand. But big government politicians and Keynesian economists tend to go back to tried and proven fallacies.

Then there are exports

The situation in our number one and number two export customers, Japan and South Korea, is different from each other and from China. They are still on the climbing part of the virus curve.