And now to the financial fallout.
And for that, we turn to Diane Swonk, chief economist at the advisory firm Grant Thornton.
Diane Swonk, welcome back to the "NewsHour" to you.
DIANE SWONK, Grant Thornton: Oh, good to see you.
JUDY WOODRUFF: So, what is it that the financial markets have seen today and over the last
few days that has caused what happened?
DIANE SWONK: Well, you really saw over the weekend the sort of crescendo of information
of it no longer being just a China thing, which, frankly, in and of itself, is more
major than they were giving it credit for.
I'm surprised the markets haven't reacted sooner, to be honest with you, given that
China has touch points into every other economy in the world and into our own. They're a very
part of our global supply chain.
So you could shut down production in the U.S. by shutting down production in China. But
what they saw over the weekend was then it moved to Korea, and then in Italy, and this
idea that you're going to have these sporadic closures of entire areas, Lombardy region
now under closure.
JUDY WOODRUFF: In Italy.
DIANE SWONK: In Italy.
That you're going to see parts of Korea shut down. That those kind of economic disruptions,
a lost sweater sale in the month of February doesn't come back in April. The idea that
you have lost sales, and it's both supply and demand. We have got production not going,
and then, on the other side of the equation, you actually have sales not be made and putting
businesses, some businesses out of business entirely, certainly stressing profits, which
is what you saw, the reaction, that it could stress a lot of profits.
And the U.S. is not immune. We have multinational companies that operate in the world.
JUDY WOODRUFF: A reminder that this economy is global. If anybody doubted it, it's here.
DIANE SWONK: Exactly. Exactly.
This is we have got we have got linkages all over the world. Our financial markets are
inherently tied. And you can't undo those ties. We have actually got the G20 meeting
and saying, well, maybe we should be more regionally based now. Maybe we shouldn't be
so globally tied.
Well, you can't undo you can't put the genie back in the bottle. It's out.
JUDY WOODRUFF: You mentioned at the beginning people looking at what happened over the weekend.
I mean, the virus has been in the news for weeks.
DIANE SWONK: Yes.
JUDY WOODRUFF: We have been watching what's been going on in China.
What is it about right now that you think triggered today's sell-off?
DIANE SWONK: Well, over the weekend, you saw I think the idea that it's not just a China
situation, that it is global in scope.
I call it an economic pandemic, if it's not an actual health pandemic yet. And what that
means is, it's going to hit in all these different places, as the professor laid out, that could
hit in all these different places and cause these massive disruptions.
And the disruptions are not easily fixed with fiscal stimulus, giving tax cuts or cuts in
interest rates. You can't recoup some of these losses. And there's also a lingering effect
of the reality that something that was once a horror movie and we saw it on a screen now
is a reality check, that this can actually happen.
And that's going to change the behavior of businesses. There's a fear factor out there
that's acting going to act as a tax on the global economy, and in the U.S., people being
afraid to congregate, people being afraid to go to public places, these conferences
being canceled.
Those all have ripple effects, and you can't recoup them.
JUDY WOODRUFF: Is there a sense that governments you just said there's there are limits to
what governments can do.
Is there anything governments can do? Obviously, taking all the health precautions possible,
but...
DIANE SWONK: Yes, absolutely.
And there are things. There are some prescriptions. But the bottom line is, yes, we can get some
lower interest rates helps companies that are in a fragile financial condition because
of this, so it can help them. So, if we cut interest rates, that can help financial financially
those companies.
But just stimulating fiscal stimulus, if people are staying in their homes, that's not going
to help on that front.
JUDY WOODRUFF: Are there parts of the world or particular industries, Diane Swonk, that
are particularly hurt or benefit...
(CROSSTALK)
DIANE SWONK: Well, the health industry yes, the pharmaceutical industry will ultimately
benefit from this, because they will come up with a vaccine. They are already working
on one, although that will take eight to nine months.
But the other side of it is, the ones that are hurt we saw oil stocks get really hit
today. That's because we're not using as much energy. All of a sudden, people are measuring
China's production by what the air quality is, because it's improving, because their
production plants aren't up and running fully and operating right now.
So the manufacturing sector gets hit. But you also see it in travel, tourism, and all
the international retailers. China's consumers are pretty big consumers everywhere. In France,
they're saying right now a 30 to 40 percent reduction in tourism. Those are big numbers.
JUDY WOODRUFF: And you mentioned to us, just quickly, that Mexico may benefit.
DIANE SWONK: Yes, Mexico could benefit, because it's within the NAFTA region in the USMCA.
So we have a trade agreement with them.
And that means more production closer. They like to be able to track it closer to home,
rather than in China. And so people will be pulling out of China and actually moving to
Mexico. They won't necessarily be moving to the U.S., but it keeps it within the North
American trade region.
JUDY WOODRUFF: A lot of moving parts.
DIANE SWONK: Yes.
JUDY WOODRUFF: Keeping an eye on it all.
Diane Swonk, thank you very much.
DIANE SWONK: Thank you.