Essay Sample: The Coronavirus Impacts on International Business

Published: 2023-04-20
Essay Sample: The Coronavirus Impacts on International Business
Type of paper:  Research paper
Categories:  Economics International business Community health Covid 19
Pages: 7
Wordcount: 1700 words
15 min read
143 views

The outbreak of coronavirus has impacted the global economy both negatively and positively in various sectors such as tourism, airline, health, and overall international businesses. Besides the escalating human cost of the disease outbreak in China and other parts of the world, economic losses are also mounting significantly. There has been a strict restriction on global travel, mainly out of Wuhan City, which is considered the center of the outbreak (Al Jazeera, 2020). Many individuals have suspended their business activities due to the fear of being exposed to the risk of infection. Several restaurants, including Starbucks, have closed their branches in China. Also, cinemas, hotels, and transport companies have much felt the impact; hence, this implies that such industries have been exposed to substantial financial losses. However, other sectors of the economy, particularly healthcare, have experienced improvements due to increased financial allocations to facilitate the screening of COVID-19, its diagnosis procedures, and treatment to contain the outbreak. The principal focus of this paper is to offer a critical overview of the devastating impacts that the coronavirus epidemic is increasingly causing international business. Therefore, it is crucial to look into these impacts in detail as regards to how they affect the economy in general.

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Impacts on Tourism and Travel

Since the outbreak of coronavirus in Wuhan city, tourist arrivals dropped tremendously immediately after the WHO issued a warning concerning the epidemic. Airline companies such as the Asia Pacific and North American airlines have been hard hit, leading to the loss of billions of dollars in revenue. Singapore Airlines has also placed several of its staff on unpaid leave, a situation that negatively impacted the locals since the beginning of 2020. However, some scholars argue that the outbreak has positively impacted the domestic economy of various countries (OECD, 2020). For instance, COVID-19 has improved the per capita GDP of different countries due to increased domestic travel. However, this distance variable, in connection to the average cost of trips, has completely adverse impacts on the overall economy of any nation (Smith et al., 2019). Although regional economies that are not hard hit by the virus can improve because tourists currently prefer traveling to closer destinations, the international tourism demand has declined and will deter global financial circulation.

The coronavirus outbreak has generally impacted the tourism industry negatively since governments of various countries have imposed rules and restrictions majorly in the airline industry to curb travel activities. For instance, China is a lucrative market for most products from Canada (The World Economic Forum, 2020). Since the outbreak of the virus, several flights to China have been canceled by the Canadian government and strict examinations of travelers from different countries initiated. These factors curtail successful trade activities. Additionally, several U.S. airline companies have felt the pinch. For example, Delta, United, American, Southwest, and JetBlue airline companies have been tasked to comply with the strict rules (Smith et al., 2019). Generally speaking, the fatal disease has negatively impacted the tourism industry and the global economy. The International Air Transport Association (IATA) anticipates a whopping $113 billion loss of revenue due to strict air travel (Chokshi, 2020). The airline companies remain highly fragile, and they will make very narrow profit margins with enormous debts if the stalemate in China was to remain unresolved for an extended period. For example, the British regional airline, Flybe, stopped its flight operations on March 6, 2020, following its loss of huge revenues immediately after the outbreak, a situation that exacerbated its financial bottlenecks.

Impacts on Trade and Retail Industries

Notably, 4,585 and counting people have died of coronavirus, with Wuhan reporting the most significant number compared to other parts of the world, including the U.S., Italy, and Egypt. The total number of coronavirus cases worldwide has been reported to be 124,910. The COVID-19 outbreak has resulted in global economic loss. Trading activities in tourism, travel, hotel, and small retail industries have been threatened due to heightened consumer fears due to the ease of transmissibility of COVID-19 across the globe (Smith et al., 2019). Several international transport companies, including FedEx and retail firms, including Estee Lauder, are keen on anticipating the impacts of the outbreak. The consequences have sent serious economic repercussions globally owing to the increased cancellations of trips and restrictions that have negatively impacted the oil industry.

Impact on Commerce

The outbreak has disrupted commerce across the globe. For instance, Apple Inc.'s manufacturing branch in China has been experiencing a severe production delay since the outbreak of the pandemic. Other than Foxconn, several other manufacturing industries such as Nissan and Hyundai shut down their firms outside China temporarily since they could hardly get motor vehicle parts. Furthermore, the outbreak negatively affected several other industries, particularly the shipping industry, and this sector affects the operation of the global market. If the airline companies were to take long before going back to their routes, it implies that China would shut down, leading to shrinking trade volumes and dwindling freight rates internationally (Smith et al., 2019).

Consequently, the disrupted economic situation will result in troubled economic growth in the Chinese market, especially after the end of the first quarter of 2020. However, China's economic growth might still be at par with global trends since the country continues with domestic manufacturing of steel and producing hundreds of thousands of coal.

On the other hand, it is uncertain what the impacts might be if the stalemate were to prolong in the Chinese supply chain since the country is a significant shareholder in major global businesses. For example, the continued shutdown of major industries will negatively affect North America and Europe due to reduced cargo volumes at major ports in China and Hong Kong (OECD, 2020). The disruption has extended to trade shows, cultural, and sporting events globally due to the increased suspension of the same, including international diplomatic meetings, aimed to drive economic development forward.

Positive Impacts of The Coronavirus on International Trade

Positively, the developing countries can receive aids from first world countries to help them fight the disease; this is, therefore, a positive impact since it will enhance the healthcare system for the developing countries. Researchers around the world are working around the clock to find either a valid vaccine or even a cure for the coronavirus, meaning that the research institutes are increasing their efforts into findings, which is an affirmative action against the coronavirus. Reduction in gas prices internationally is an advantage since people will no longer pay for high costs due to high demand like standard days.

Additionally, the coronavirus outbreak has positively impacted the economy due to decreasing oil prices owing to reduced demand for oil by large transportation companies, airlines included. For instance, the increased restrictions in the travel industry have reduced the use of jet fuel (Chokshi, 2020). Therefore, there has been less oil demand and reduced use of oil-based products. Additionally, there is diminished industrial activity with some airline industries and other several companies in Wuhan sending their employees home, meaning that less oil is on demand. If the outbreak continues to worsen the situation, there would be substantial indirect effects on oil consumption that signals the near-term calculations of real oil demand globally. However, the impact on the oil market might only be insignificant because the economic burden will be majorly felt in the stock market. There is a direct linkage between the effects of coronavirus on the global economy and oil demand, and this cumulative effect will significantly disadvantage the stock market. Whatever the case, the coronavirus outbreak can only affect the oil market in 2020. Still, after the containment strategies are put in place, the future demand curve for oil products indicates a sharp increase. Oil prices reduced significantly by February 2, 2020, and Brent and WTI experienced a massive rebound through the stock market (Blakemore, 2020). However, this kind of bump might be contextualized within the concept of volatile and uncertain economic prospects. Additionally, the increasing expectations for the cuts in interest rates in both the U.S. and Canada could as well be responsible for a production cut by OPEC + (Blakemore, 2020). Therefore, the challenges facing the performance of the oil market globally should be based on several other aspects, including geopolitical perspectives, apart from the coronavirus outbreak alone.

However, in my opinion, I would argue that although coronavirus has positively impacted global trade in terms of improved health care, reduced oil prices, and a growing domestic economy, there are more adverse effects of the pandemic. For instance, the outbreak of the virus has resulted in massive cases of employees sent on unpaid leave, while several other airline companies like Flybe have suspended their operations. Several commercial activities in retail, international businesses, and a dwindling trade volume, especially in freight rates globally.

Conclusively, it is not clear how long will the devastating impacts last as the virus is not yet controlled fully and continues to spread since there is no accurate vaccine or cure. Travelers are advised to minimize their movements for the period of combating the epidemic as the world strives to come up with a solution to the menace. Although regional economies that are hardly hit by the virus can improve because tourists currently prefer traveling to closer destinations, the international business demand has declined and will deter global financial circulation

References

Al Jazeera. (January 27, 2020). By the numbers: Economic effects of China coronavirus. Al Jazeera. https://www.aljazeera.com/ajimpact/numbers-economic-effects-china-coronavirus-200128024428672.html

Blakemore, A. (Tue, March 3, 2020). Atlantic Council. Coronavirus and the oil market: The effects thus far and what to expect next. Atlantic Council. https://www.atlanticcouncil.org/blogs/new-atlanticist/coronavirus-and-the-oil-market-the-effects-thus-far-and-what-to-expect-next/

Chokshi, N. (March 10, 2020). The New York Times. U.S. Airlines Say They Can Absorb Impact of Coronavirus on Travel. The New York Times Company. https://www.nytimes.com/2020/03/10/business/airlines-coronavirus.html

OECD. (March 2, 2020). OECD Interim Economic Assessment Coronavirus: The world economy at risk. http://www.oecd.org/berlin/publikationen/Interim-Economic-Assessment-2-March-2020.pdf

Smith, K., M., Machalaba, C., C., Seifman, R., Feferholtz, Y., & Karesh, W., B. (2019). Infectious disease and economics: The case for considering multi-sectoral impacts. One Health, Volume 7. Elsevier B.V. https://www.sciencedirect.com/science/article/pii/S235277141830034X

The World Economic Forum. (February 5, 2020). The World Economic Forum. Trapped tourists: how is the coronavirus affecting travel? World Economic Forum. https://www.weforum.org/agenda/2020/02/the-coronavirus-will-hit-the-tourism-and-travel-sector-hard/

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