Photo:Xinhua

Compared to the US stock market's bearish turn amid coronavirus fears, the global economy is likely facing a bigger threat from the huge blow to trade, which will likely lead to greater impact than that seen during the China-US trade rows.

The recent stock market fall triggered by the rapid spread of the virus worldwide is not enough to signal a global recession. It is already clear that global trade will inevitably take a great hit based on the epidemic fallout so far, which has included port shutdowns, supply chain disruptions, decreased orders and sluggish business performances. Although measures taken by various countries to protect their people - like the US' restrictions on travel from 26 European countries - are understandable, limiting personnel exchanges and transportation is bound to exacerbate the shock to global trade and the world economy. 

According to a recent report from French credit insurance company Euler Hermes, global trade is expected to lose $320 billion every quarter due to business disruptions caused by the coronavirus, which is "comparable to the annual impact of the China-US trade dispute on world tariffs in 2019."

There are now more than 118,000 coronavirus cases in 114 countries around the world, forcing the World Health Organization to declare it a pandemic. Since much remains unknown about the pandemic, it is hard to assess its impact and how long it will take to bring the virus under control. 

But it is probably time for countries, particularly economies heavily dependent on trade, to take precautions and prepare for shocks to their trade in the months to come. The recent collapse of the OPEC+ talks has already suggested that the outbreak will weigh on global demand for oil and other commodities, thus commodity exporting countries will be hit hard. Moreover, in a highly globalized world, other economies like Vietnam that rely heavily on exports of manufactured goods will face more downward pressure due to shrinking orders.

Finally, trade contraction is a problem facing the world economy, and it cannot be solved by one country alone. We hope that multilateral organizations like the WTO and the G20 will urge their members to strengthen international coordination in policy areas and adopt a series of targeted measures, so that unnecessary trade disputes can be prevented from further deteriorating global economic damage.

As for China, with its grim outlook on trade, the country should prioritize boosting domestic demand in the year ahead.