OPINION | The world will pay a growth price for the Wuhan coronavirus

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SOME of President Trump’s advisers may want to wall off the U.S. and China into separate spheres of influence, but the novel coronavirus is showing the futility of economic quarantines. Like it or not, the Chinese and world economies sniffle and cough together.

Commodities prices sank on Monday amid news that the coronavirus and resulting economic contagion are spreading. U.S. crude oil prices have fallen 20 percent over the last three weeks as Chinese oil demand is expected to fall by two million barrels a day and global economic growth forecasts have plunged. Copper is down 13 percent, and iron and steel prices have tumbled.

More than 20,000 coronavirus cases have been confirmed worldwide — an eight-fold increase over the last week — and experts say hundreds of thousands may not yet have been diagnosed. Two dozen or so countries have reported cases, and many have restricted travel from China to limit the contagion. Companies are evacuating employees from China.

Most businesses in Wuhan where the virus originated have shut down as China has quarantined 56 million or so people in the province of Hubei. Businesses across the mainland are extending the Lunar New Year holiday or directing employees to work from home. Apple, McDonald’s, Levi Strauss and Starbucks have temporarily closed stores.

U.S. manufacturers such as Ford, Apple and Tesla have temporarily halted production. One-sixth of Apple sales and nearly half of chip-maker Qualcomm’s revenues come from China. So do 80 percent of active ingredients used by drug-makers to produce finished medicines. Because China is the world’s largest manufacturer and an enormous consumer market, the economic freeze will disrupt supply chains and reduce corporate earnings.

China’s GDP growth was already almost certainly lower than the official figure of 6 percent, and it is likely to fall by a third or more. On Monday its central bank lowered interest rates and injected a net new inflow of 150 billion yuan ($21 billion) to soften the blow. Damage to the global economy is harder to forecast. It may be relatively muted if the virus can be contained quickly and normal business activity resumes.

But the virus’s rapid spread across China suggests it is more infectious than SARS, which took eight months to contain in 2003. China is also now far more important to the world economy, accounting for about 15 percent of global GDP compared to 4 percent in 2003.

The virus shock is hitting just when business investment was expected to rebound after a successful Brexit and a truce in Mr. Trump’s trade wars. Now CEOs will probably wait more months to see how the contagion plays out. The yield on the 10-year Treasury has fallen by about 30 basis points this past month to 1.53 percent, causing the yield curve to invert again. The 2019 U.S. GDP growth rate of 2.3 percent may be the best we can hope for if the first quarter is weak.

The Federal Reserve will be watchful, but with rates already low there’s no reason now for panic rate-cutting or new quantitative easing. U.S. stocks recovered somewhat on Monday as investors bet that the American economy is less vulnerable to external shocks than is most of the world. Saudi Arabia wants the Organization of the Petroleum Exporting Countries to slash crude production to bolster prices, a useful step that could help U.S. shale producers.

It’s probably too much to ask Mr. Trump to lift his tariffs on Chinese exports, though it would help. At the very least he could give Beijing more latitude to meet its promise to buy $200 billion more in U.S. products over the next two years. The last thing the President should want when campaigning for re-election is an economic pandemic.

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