Shanghai is home to the largest container port in the world and processes 20% of Chinese exports abroad. The Chinese government's 'zero-COVID' policy has put almost every one of the city's warehouses, plants, and trucks out of commission, and the port and airport are only functioning in a limited capacity. The cargo pile up - which gets larger every day the shutdown continues - is threatening to spark another round of supply chain woes. Per a FoxNews report, experts are warning that the situation seen today across China is now "worse than Wuhan'' earlier in the pandemic and it may create "the most significant logistics disruption since the start of the pandemic."
So, with no immediate end to China's lock down in sight, what does this mean for Americans and their money?
Well in the short term, the logistics and consumer merchandise industries will be negatively impacted. FreightWaves, the world's leading supply chain intelligence platform, estimates that nearly half of the containers that come into the United States originate from China. Similar to 2020, this may cause the entire economy to slow down and consumer prices to go up.
A good way to measure the possible impact is to track the United States trucking industry. This industry is one of the largest revenue streams in the nation's economy and is responsible for transporting 70% of all goods in the U.S. A recent Bank of America Report noted that demand for trucks has already started to decline. This, coupled with higher fuel prices, rising inflation, and a weakening dollar is fueling talks of a recession.
Joe Rajkovacz, the Director of Governmental Affairs and Communications for the Western States Trucking Association, warns that “when trucking demand falls, it means the economy's slowing down.”
This fear is renewing efforts to bring critical manufacturing and production back to the U.S. and neighboring countries. First steps have been supported by the Biden administration, which in early April directed Federal Agencies to limit procurement of all goods and services related to last November's mammoth infrastructure deal to American companies. In addition, Lorenzo Berho, CEO of Vesta, a Mexican developer of industrial buildings and distribution centers, said “the shift toward shorter supply chains to places like Mexico is under way to reduce exposure to Asia. Globalization as we know it may be coming to its end.