Virus Exposes Globalization’s Soft Underbelly

Virus Exposes Globalization’s Soft Underbelly

(Bloomberg) —

As the coronavirus ricochets around the world, the impact extends way beyond the health implications of an epidemic that has already killed 3,000 people.

The prospect of coordinated action by central banks and possibly governments may halt the immediate slide in markets, which have suffered the worst rout since the global financial crisis. But underlying economic and political vulnerabilities have been exposed.

China’s manufacturing activity hit a record low in February, risking damage to companies such as Apple (NASDAQ:) and Volkswagen (DE:) that rely on Chinese production facilities. More broadly, damage to supply chains caused by the virus is fanning concerns from Australia to the U.S. of an over-dependence on China.

In the political arena, President Donald Trump’s Republican supporters accuse Democrats of stoking fears that could derail the U.S. economy and undermine Trump’s re-election hopes.

From South Korea to Europe, there’s a rush to blame foreigners and to further restrict immigration. Trump tweeted over the weekend that his moves to close the border and curb flights put the U.S. “way ahead in our battle with Coronavirus.”

Panic and political opportunism pose the biggest challenge yet to the interlinked world we live in. Globalization may prove to be just another victim.

Global Headlines

Moment of truth | The best chance Bernie Sanders’s Democratic opponents have of stopping him from winning the party’s presidential nomination comes tomorrow. But his top two challengers — a newly buoyant Joe Biden and a beleaguered Michael Bloomberg — both face huge obstacles to doing so, while Elizabeth Warren is struggling for momentum. Still, if the nominee is going to be anyone but Sanders, Democrats in the 14 states voting in the single biggest day of balloting on Super Tuesday need to choose an alternative.

  • Click here for more on how California’s crisis over income inequality and housing affordability has boosted Sanders ahead of the state’s primary.
  • Pete Buttigieg — who rose from a young mayor of Indiana’s fourth-largest city to the first openly gay presidential candidate to earn delegates — ended his campaign yesterday.
  • (Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)

Border tensions | While Turkey says more than 100,000 migrants have left for Europe amid the latest Syria fighting, and Greece says it has stopped mass crossings, visits to both sides of the border suggest it’s not yet a crisis of such magnitude. Turkish President Recep Tayyip Erdogan is playing a particularly sensitive card as populists beat the drum about migrants coming to Europe with diseases.

  • European foreign ministers plan to meet this week, while Erdogan is set to visit Russia on Thursday to speak with President Vladimir Putin on the Syria issue.
  • Turkey has deployed swarms of killer drones to strike Russian-backed Syrian government forces.

Ordinary triumph | Slovak anti-corruption parties led by Ordinary People scored an unexpectedly big win at weekend elections, riding public anger at the 2018 murder of an investigative reporter. The result anchors Slovakia in Europe’s mainstream, averting the risk it could veer onto the rebellious paths of neighboring Hungary and Poland, and shutting out a far-right party’s challenge. But questions remain over the likely new government’s stability amid opposing policies and personalities among its four members.

Behind the fall | Before his shock resignation as Malaysia’s prime minister, Mahathir Mohamad was dealing with a series of by-election losses and damaging internal bickering. But it was a failed $7 billion roads deal that eventually brought his coalition unstuck, Anisah Shukry, Elffie Chew and Yantoultra Ngui report. Mahathir isn’t giving up: he says he has the numbers to oust new Prime Minister Muhyiddin Yassin in a March 9 parliament vote.

Rocket Man’s return | North Korea’s launch today of two unidentified short-range projectiles off its eastern coast comes just after the first anniversary of the failed Hanoi summit between Kim Jong Un and Trump. Pyongyang may be using this day as a platform to nudge Washington or neighboring South Korea to take action on Kim’s demands, including sanctions relief.What to Watch This Week

  • Benjamin Netanyahu and Benny Gantz are locked in their third match-up in less than a year, as Israelis burdened by election fatigue and political paralysis vote today with surveys forecasting another deadlock.
  • The U.S. Supreme Court on Wednesday will hear its first abortion case since Chief Justice John Roberts became the pivotal vote on the issue, possibly foreshadowing a fight over the landmark 1973 Roe v. Wade ruling.
  • British and European Union officials start formally hashing out a future trade deal today in Brussels amid fears that red lines on both sides could lead to a breakdown in the talks as early as April.
  • European Commission President Ursula von der Leyen plans Wednesday to unveil a proposal to make the EU climate neutral by 2050.
  • Argentine President Alberto Fernandez called yesterday for an “orderly resolution” of the nation’s debt crisis, speaking at Congress’s opening legislative session for 2020.

Thanks to all who responded to our pop quiz Friday and congratulations to reader Stephen Liddiard, who was the first to name Italy as the initial Group of Seven nation to sign up to Chinese President Xi Jinping’s Belt and Road Initiative. Tell us how we’re doing or what we’re missing at balancepower@bloomberg.net.

And finally… News that U.K. Prime Minister Boris Johnson is to wed his partner Carrie Symonds and that the couple expect a baby in the early summer prompted British media to note that the Conservative Party leader will be the first premier in history to divorce, marry and father a child while living at 10 Downing Street. Saturday’s announcement came as Johnson, who has been married twice before, battles fallout from the resignation of a top civil servant alleging a campaign of smears and bullying at the Home Office.

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