Virus impact 'will be bigger than trade war'

The coronavirus outbreak will have more impact on global trade than the US-China trade war, with £20 billion (NZ$40.5b) a week lost on exports, a study has predicted.

Euler Hermes, which insures payments to exporters, estimates that the weekly loss will be equivalent to a rise in the world import tariff on goods by 1 percentage point - more than the effect of the trade dispute last year, which was 0.7 percentage points.

It said the loss will come via shocks on both the supply and demand sides as manufacturing production stalls, exports to China fall, and travel is reduced. Germany, Hong Kong, South Korea, the US and Japan are the most exposed.

"While the negative spillovers from the coronavirus epidemic will not last for more than three months, we doubt the global economy is strong enough to catch up entirely after the loss, given that the growth acceleration in the second half will be capped by US-driven uncertainty," Euler said.

The disruption to global supply chains could reach the British high street by the end of the month if the outbreak is not contained. Companies have told analysts at UBS that Chinese factories being shuttered until the end of February would start to impact the availability of stock at retail giants.

Dunelm, H&M and Card Factory were considered by UBS among the most vulnerable to further disruption in Chinese factories. Those retailers were estimated to have exposure to the materials and labour needed for products - the cost of goods sold or manufacturing exposure - of at least 50pc.

"From our discussions with companies, it seems product availability would be more significantly impacted if factories remained closed in March," warned UBS analyst Olivia Townsend.

Factories across China are still closed to try to limit spread of the coronavirus, leaving US business owners in limbo. Photo / AP

But the retailers played down supply worries. Dunelm said it was "monitoring the outbreak carefully" but has not "assumed any material disruption to our supply chain or any financial impact".

H&M said its "strong presence in several production countries gives us flexibility". Card Factory said it has "looked at our supply chain and identified alternative sources where necessary", insisting it is "well insulated".

Meanwhile, Apple has blocked staff and visitors from offices, including in London, who have arrived from China in the last fortnight. The iPhone maker warns arrivals that due to the coronavirus risk, they should rearrange meetings as video calls as they check in to offices worldwide, The Sunday Telegraph has learned.

It faces potential delays to its device supply chain as its biggest suppliers on mainland China, such as Foxconn, are forced to keep workers at home. Analyst firm Wedbush Securities predicted that for every week its factories remained closed, Apple could lose out on up to a million iPhone sales in the quarter.

Apple boss Tim Cook said in January the company was working on "mitigation plans" for its supply chain.

Innocent, the smoothie maker controlled by Coca-Cola, has had to push back plans to launch in China.

Chief executive Douglas Lamont said: "We have just launched in Japan, and we were about to launch in China in two weeks' time, but we've told the teams to stay at home and look after themselves until things improve."

Additional reporting by Tom Rees, Hannah Uttley, Matthew Field and Laura Onita

The Daily Telegraph - Telegraph Media Group