Supply chains suffer from Covid-19 restrictions in China
Sophomore Ava Loftus turned 16 in March. She and her family went to multiple car dealerships to find a car for Loftus. And after sitting in a Kia Seltos, she knew it was the car for her.
“I sat in the Kia Seltos, and I was like, ‘Wow, I love this car so much,’” Loftus said. “I really wanted the car. I had my mind set, and this was the only car I wanted.”
Because of supply chain shortages, Loftus was unable to get her car. The Kia Loftus wanted was not available in any Dallas dealerships.
“We couldn’t find the [car] I wanted anywhere because there are no cars,” Loftus said. “I was really frustrated because I wanted this particular car.”
However, her father has a friend who lives in Columbia, Missouri. His friend looked around the city, and found that one of the Kia dealerships there had the car Loftus wanted. So Loftus and her father planned a trip to get the car.
“It was stressful how hard it was to get the car, and I didn’t know when I was going to be able to drive it,” Loftus said. “It sucked because I knew I was able to drive, but I couldn’t because I didn’t have a car. So I was impatiently waiting.”
She didn’t have to wait long. On March 28, Loftus was finally able to drive her first car, a black Kia Seltos. Now she had the convenience of being able to drive herself to school and friends’ houses.
“I had to wait to get the car,” Loftus said. “But I was really excited to get my car. And it was definitely worth the wait.”
In 2021, Americans bought 15 million new cars, and it is predicted that in 2022, Americans will buy 14 million cars. But the decrease in car sales does not mean there will be more cars or that they will go down in price.
“[The supply chain] is still backlogged because most of our imports come from China, and they’re still shutting their own plants down,” AP economics teacher Amy Livingston said. “We depend so much on international trade, [China is a] really a critical chain in the whole link.”
Globalization began in the 20th century and is a global market that connects the majority of countries. For example, a car is made up of 30,000 parts that come from several countries, and they all need to be put together.
“Globalization is important because no country can be self-sufficient,” Livingston said. “The only country to try to be self-sufficient is North Korea, and no one wants to live there. Countries can specialize in something that they’re really good at and trade with other countries. So it brings prices down. Consumers benefit, producers benefit because it increases competition.”
According to Bloomberg, China has policies of shutting down cities and businesses after a few positive Covid-19 tests. In August, The Shijiazhuang government put the city of 11 million under lockdown. All subway lines and non-essential businesses were shut down.
“Back in 2020, when China just shut down their economy [it created a] domino effect; most of our goods come from China,” Livingston said. “The parts that go into what we produce in the United States come from China. So when China shut their economy down, it rippled down the system. You saw ships getting backlogged in ports because people couldn’t work in the ports.”
In 2020, the world was isolated by Covid-19. Cities instituted curfews, and Americans were told to stay indoors. According to the New York Times, economists assumed that people would spend far less money, so factories downsized in order not to lose money.
“[Economists] try to make educated guesses about what they see,” Livingston said. “They look for certain indicators to try to anticipate certain events. Right now they’re looking at what’s most concerning: inflation and the recession. A lot of economists are all on the same page — this is likely just going to get worse over the next year.”
The economists were wrong. People did not stop spending money, but their purchasing habits changed.
“Stimulus checks [meant] people were getting money not to go to a job because in a sense, their job had been taken away from them,” Livingston said. “So you combine the supply chain issues coming from China with our own issues, the stimulus checks. That was just going to exacerbate the situation, which it did. And that’s what we saw this problem [of], this backlog of goods, a lot of things that get made in China.”
Inflation occurs when there is a broad increase of prices and is measured by the consumer price index, a measurement of prices of common goods like gas and groceries. Current CPI is measured through an equation the value of goods this year divided by the value of goods last year multiplied by 100 to get a percentage.
The CPI of June 2022 was a 9 percent increase from last year. According to Inflation USA, the inflation rate of 2022 is expected to be 8.5 percent; this is the highest it has been since 1981. Inflation is calculated by an equation of CPI of this year subtracted from CPI of last year divided by CPI of last year multiplied by 100.
According to Livingston, people often say that Covid-19 shut down the economy, she believes that governments shut down the economy. “That’s never happened before,” Livingston said. “The economy is organic. It’s buyers and sellers buying and selling things. When the government comes in and tries to stop that from happening, it’s going to be catastrophic. So what you saw happened with Covid-19. This is why [economists] couldn’t predict this, because no one could ever predict that governments would just shut down and say, you can’t work unless your job is considered important enough for you to be working. Some people don’t have the luxury of working from home. Some people don’t have the luxury of being able to not go to a job.”