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In the new world of coronavirus, life moves quickly.

A month ago, with U.S. equity indexes at record highs, there were but few references in the U.S. media to the virus in China, in some other countries, and on cruise ships. By this week, with equity markets pausing momentarily, having slumped by 30%, there is 24/7 coverage of a pandemic that has put nation after nation into lockdown and quarantine. The economic consequences are going to be surprisingly ugly, with U.S. gross domestic product likely to record a double-digit annualized decline in the April-June quarter and a recessionary year pretty much baked in the cake.

The U.S. and Europe are about a month or so behind China, epidemiologically but also economically. To see what might be coming down the track, think about China for a moment.

In the past two weeks, Chinese economic data for February—the first month of lockdown—have shown an unprecedented collapse in readings for business confidence, industrial production, investment, and retail sales. Industrial production and services output, for example, were down about 13% in the year to January/February. The nominal value of retail sales was down 20%, in spite of a surge in online shopping and deliveries. Investment spending and property transactions fell off a cliff.

March data will hardly be much better, and there will be a unique and large contraction in China’s GDP in the first quarter. Year-on-year growth could be negative, too.

Even though China is now slowly getting back to work, the unemployment rate rose one percentage point, to 6.2% (certainly an underestimation). The global coronavirus recession now emerging will sting China’s economy just as its leaders believe the worst to be over. Officially, the government is still targeting about 6% GDP growth in 2020, but China will be lucky to eke out a positive outcome at all.

The U.S. and Europe are in pursuit, even if Western lockdowns and quarantines are less draconian. That said, Italy, Spain, and France have recently mandated tough containment measures. So have a raft of U.S. cities and states. Open borders and public health crises do not make comfortable bedfellows, and in the past month the U.S., Canada, and the European Union have been among many to restrict access by foreign citizens. With airlines reeling, and shops and factories on the cusp of large losses, we have arrived at what economists call a “sudden stop” in the travel, tourism, hospitality, entertainment, retail, and housing sectors.

In response, the Federal Reserve and the Trump administration have joined other G-7 central banks and governments in conveying their angst about an unfolding recession, if not looming depression. The Fed announced emergency measures to cut the federal-funds rate to zero and pump several hundred billion dollars into the financial system to prevent a potentially damaging seizure of liquidity. Renewed purchases of Treasury bonds, or quantitative easing, and the establishment of a new lending facility to support the commercial paper market—a vital credit source for larger companies—were among initiatives designed to temper the “dash for cash” and instill order into credit markets.

The federal government has a potentially more powerful role to cushion the fall in GDP brought on by the inability or unwillingness of the private sector to spend and borrow. Treasury Secretary Steven Mnuchin is trying to get the Senate to agree to an $850 billion package of stimulus, which ultimately might include a payroll-tax cut, help for the beleaguered airline and other sectors, loan assistance and tax-payment relief, health care and other investment, and direct income support payments.

At just over 4% of GDP, this figure would be significant. To be effective, though, a lot of fiscal stimulus might have to wait for the peak of the infection, the restart of businesses and factories, and normalization of work. It might not be enough.

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The consumption share of GDP in the U.S. is 68%. Spending on transportation services, leisure activity, hospitality, and eating out amounts to just over $2 trillion, or about 14% of total consumption. A 20% drop in this sort of consumption alone translates into a direct 2% decline in GDP (8% annualized in a quarter). But the secondary effects of shutdowns, such as rising unemployment, bankruptcies, and loss of confidence, would compound the impact considerably.

China’s experience may well foreshadow what’s coming for the West. But neither in China nor anywhere else do we know if there might be a second wave of seasonal infections or when an effective vaccine will emerge.

On top of the U.S.-China trade war, relations have continued to sour during and because of this health crisis. Moreover, we have yet to think through the transformational impact of the crisis on supply chains, globalization, and Sino-Western relations—and at home, on public health systems, the nature of work, and fiscal legacies.

The 2020 economic effects of the coronavirus crisis are just an hors d’oeuvre.

George Magnus is the author of Red Flags: Why Xi’s China Is in Jeopardy; an associate of the China Centre in Oxford, Britain; and a former chief economist of UBS.

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