In today’s world very few companies produce their products from start to finish. Instead, the production process is highly fragmented and takes place all over the world. This design of the global economy has enabled companies around the world to specialise and has created efficiency gains.
The coronavirus, however, also shows how vulnerable the global economy has become due to firms’ reliance on these highly fragmented global supply chains. A shock in one country can disrupt the entire supply chain, especially as countries nowadays rely more on just-in-time delivery and therefore hold lower inventory stocks. Hence, the virus could give further impetus to the recent trend of deglobalisation.