Covid Outbreaks in Asia Fuel Inflationary Pressure

June 11, 2021

As things start to return to normal in the U.S. and other western economies, a fresh outbreak in parts of Asia is threatening to disrupt manufacturing and shipping, weighing on a global economy that is just coming back to life.

Last year, Asian countries like China, Thailand and Vietnam were more successful than most western nations at containing the spread of the virus. Now, however, immunization levels in the region lag behind America and most European nations, and the region must contend with another wave of outbreaks.

The Chinese port city of Shenzen has been brought to a halt by an outbreak among dockworkers. Some ships at the port have had to wait two weeks for containers to be loaded, further driving up pieces in an industry that has already been hit by shortages of containers and a weeklong blockage at the Suez Canal earlier in the year. The price for shipping a 40-foot container to Los Angeles has jumped to $6,341, up 63% from the start of the year, according to the Wall Street Journal.

Meanwhile, infections in Malaysia and Taiwan are making the semiconductor shortage even worse. Taiwan alone accounts for one-fifth of the world’s semiconductor production and has seen big outbreaks among the nation’s factory workers, resulting in mass quarantines and cutting output.

The bottleneck around shipping and semiconductors is likely to continue driving up prices in the west, potentially hindering the economic recovery.

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