China’s trade data showed stronger than expected exports and imports for March. This reflects the ending of the Chinese lockdown and it does fit with some of the data that we received earlier from countries like South Korea.
However, this improvement is something like an island of calm in the storm of the coronavirus. The threats of a supply shock from China was lifted but then the global demand shock of other economies shutting down has hit, the Asia Times reported.
In fact, given that China is just a link in long global supply chains and the fact that Europe in particular has gone into lockdown is something that will also affect Chinese supply chains. China does depend on European parts for some of its manufacturing.
Besides that, there has however also been some news on lockdowns elsewhere. In Europe, in Spain they have started to ease restrictions. It could be helpful to recall that Spain’s restrictions were more aggressive than in various other European countries. Large sections of the Spanish industry were closed, which at the same time have remained open in some other European countries, the BBC reported.
Denmark will also start to ease restrictions tomorrow. Danish restrictions were less aggressive than in some other countries. The results will all be obviously closely watched.
Over in France, President Macron has added another month to the lockdown with a promise of easing subsequently. With the delay, after two months of lockdown, there is a risk of civil disobedience starting to creep in, the New York Times said.
So, pulling out of the promise of easing is probably important from a behavioral economics point of view.
The UK will decide on an extension to its lockdown over the course of this week, Reuters explained.
Meanwhile, in the United States, which is still not completely locked down, there is something of a tussle emerging between President Donald Trump and various state governors from the east and the west coasts, who on Monday banded together in two regional pacts to coordinate gradual economic reopenings as the coronavirus crisis finally appeared to be ebbing, Reuters reported.
Trump asserted his authority to end lockdowns. The state governors and legal experts are pointing out that the president doesn’t have that authority and Trump’s tweeting will not make it so.
The risk, economically speaking, is a confused end to the U.S. coronavirus lockdown. If some people follow Trump’s advice and others follow the state governors’ orders, presumably the risk of the virus would rise.
If you only reopen part of the supply chain, a supply chain that doesn’t function once inventories have been consumed, which is something that China is now starting to experience.
In related developments, East Coast states and West Coast states are coming together separately as regions to coordinate policies while Trump establishes a council to “reopen” the U.S. economy.
The council is not expected to include health officials nor a single economist, but could bring to the forefront the push-pull tensions within the White House between economists and public health officials over how quickly to reopen the economy vs. proceeding cautiously to ensure the virus doesn’t spike again.
Many medical experts in the government, including Dr. Anthony Fauci and Dr. Deborah Birx, have cautioned that easing up on social distancing too soon could lead a new wave of the disease that would require shuttering the economy again, with disastrous results, the Associated Press reports.
In the meantime, oil prices have stabilized in the wake of Sunday’s agreement to cut oil production a little less than 10 million barrels per day from the global oil production. While the supply cut is significant, the demand cut is more significant and that will take some time to fade, the BBC said.
Finally, central banks have basically signaled the willingness to provide as much liquidity as is required to the economies. The question is whether that liquidity is being transmitted as fast as it needs to be. Otherwise, this is essentially a problem for “fiscal” policy to resolve. Central banks play very much a junior role to the fiscal authorities.
Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.
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