In late March 2022, China began locking down Shanghai, the world’s largest port, amid rises in COVID-19 (coronavirus) cases.
Despite the country’s 87.0% vaccination rate, China is locking down its financial capital of 25.0 million inhabitants as part of its Zero-Covid policy.
Shutting down the world's largest port will have consequences that reverberate over the coming months, especially since the global supply chain has yet to return to normal despite advances in curbing the virus. Moreover, the growing concerns of inflation and the conflict in eastern Europe have added pressure to the global supply chain.
Overall, these lockdowns come at a time of fragility in the global economy.
Effect of lockdown in the world's largest port
In early 2022, the world seemed to be on the path of returning to prepandemic normality. However, the March lockdowns in Shanghai are reapplying stress to the weakened global supply chains.
The lockdowns in Shanghai have created difficulties with imports coming into China due to inland connections being disrupted and factories closing in the region. The congestion on the import side of traffic disrupts exports leaving the country.
Moreover, when the cargo is cleared, it will still take more than 100 days to reach its destination in the United States.
From Tesla to retailers
Due to China’s crucial role in the global economy, these lockdowns affect several companies across a variety of industries, including car manufacturers and the retail sector as a whole.
Specifically, CNN cites that Tesla sold 98.0% fewer vehicles in China in April 2022 compared with March 2022. Additionally, during the same period, Tesla car production fell 81.0% in April, with figures down from 55,462 cars produced in March to only 10,757 in April.
These figures are in line with Shanghai’s overall industrial output in April 2022. Recently, Reuters reported that the city’s industrial output in April 2022 shrank 61.5% compared with 2021.
Additionally, it noted that retail sales in Shanghai dropped 48.3% compared to China’s national drop of 11.1% during the same time period.
Although these figures are related to specific industries in China, they indicate the economic consequences of China’s Zero-Covid Policy.
It is likely these lockdowns will affect industries such as Automobile Engine & Parts Manufacturing in the US and others across the globe.
The future
At the time of writing, it is evident that the Shanghai lockdowns have resulted in tangible losses. In the short term, Bloomberg notes that the Shanghai lockdowns and port congestion will cost an estimated $22.0 trillion to the global merchandise trade.
However, the long-term consequences to the global economy are still uncertain. As data is released over the coming months, it will become clearer how these shutdowns affected companies and industries in other nations.
It has been two years since the global pandemic began. Despite the time and progress, the pandemic has created lingering uncertainty and doubts over the future, from concerns over a potential US housing bubble to worries about the rising cost of living.
