NOEL KING, HOST:
Do not travel to China, the State Department warned last night. That advisory was issued after the World Health Organization declared the coronavirus outbreak a global health emergency. The virus emerged in China, but now there are almost 10,000 cases across the world. So what does all of this mean for a very globalized economy? NPR's chief economics correspondent Scott Horsley is on the line. Hey, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Noel.
KING: Do not travel to China is quite a warning.
HORSLEY: That's right. Travel companies were among the first to feel the effects of this outbreak. We had already seen a substantial drop in travel. A lot of airlines had already scaled back or eliminated service to China, and this will certainly add to that. Although, of course, the big question is we don't know how long this travel advisory will remain in effect.
KING: Well, there's that uncertainty. There's a lot of other uncertainties as well. You've been looking into what this could cost the global economy. What'd you find?
HORSLEY: Yeah. This is a new virus, and so there's a lot we don't know - how easily it spreads, how deadly it is, how long the outbreak extends - so people are having to make guesses. We've seen some wild swings in the stock market this week as investors try to get a handle on this. The Federal Reserve is certainly paying attention. Fed Chairman Jerome Powell observed this week that we've already seen a lot of human suffering. But the economic fallout is still very much a question mark.
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JEROME POWELL: Of course the situation is really in its early stages. And it's very uncertain about how far it will spread and what the macroeconomic effects will be in China and its immediate trading partners and neighbors and around the world.
HORSLEY: Even if the outbreak is largely contained within China, you know, you're talking about the world's second-largest economy, Noel, 20% of all economic activity around the globe. So there will be ripple effects.
KING: We have watched the number of cases go up - 2,000, 4,000, 6,000, 8,000, now nearly 10,000. As the number of cases goes up, does that correlate with or translate to economic damage?
HORSLEY: You know, the numbers have certainly climbed rapidly. And because this is a novel virus, that gets your attention. But the numbers are still pretty small compared to what we see all the time from more familiar illnesses like the flu. The thousands of people who've been sickened with coronavirus would barely be a blip on the global economic radar. It's the tens of millions of people who've been quarantined that are really causing the economic cost. Those are people who are not traveling, who are not shopping.
Chinese consumers have become much bigger players on the world stage than they used to be. For example, China is now the No. 2 market in the world for Starbucks. That company has shuttered more than half its stores in China. That's a lot of coffee that's not being drunk. Of course, China is also a major supplier to American companies and American consumers. That's another place we'll see the impact.
KING: So - please.
HORSLEY: Chinese factories were already shuttered for the Lunar New Year holiday, but that shutdown has now been extended. That will have ripple effects. And during the trade war, a lot of U.S. businesses started to explore looking for alternate suppliers. But you can't replace China overnight, and this is another reminder of that.
KING: We always hear that we live in a global economy. What does an episode like this tell us about that fact?
HORSLEY: In a way, Noel, the global economy is like that wet market in Wuhan, where scientists suspect this outbreak began. You know, it's a place where wild and domestic animals were all crowded together, and viruses can easily jump from one species to another. In today's global economy, we're all crowded together and interconnected. And while there are lots of advantages to that, there are also some risks.
What happens in Wuhan doesn't necessarily stay in Wuhan. And even though Chinese authorities have tried to wall off this outbreak with these massive quarantines, once those global business ties are established, they're very hard to unwind.
KING: That's a really interesting metaphor. NPR's chief economics correspondent Scott Horsley. Scott, thank you.
HORSLEY: You're welcome.
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