The Influence of Inflation Geopolitical and Trade Risks on the Global Supply Chain

Economic markets and specifically inflation, geopolitical and trade risks, and the changing global health situation, will all impact supply chains

FREMONT, CA: Heading into 2023, multidecade-high goods-related inflation has shown to be durable, with the U.S. Producer Price Index close to 10 percent. The U.S. Federal Reserve and central banks in most industrialized nations intend to increase borrowing costs soon and begin withdrawing money that has previously flooded the financial markets due to bond purchases. Constraints and inflation may worsen before turning around due to the lagging effect of monetary actions.

Industries like semiconductors that need significant, long-term investments to increase capacity can experience excess supply and sluggish demand. Furthermore, the combined consequences suggest a contraction of the economy as 2022 data start to serve as the baseline for comparison. A gradual landing planned by central banks with sporadic fiscal assistance may be the ideal scenario.

Several additional geopolitical and trade threats might disrupt international supply chains. One year after Brexit, the effects on the economy are becoming more apparent, including increased red tape at international border crossings, disrupted labor markets, and sluggish trade growth because of unfavorable tax and tariff regulations.

On the other hand, APAC countries will undoubtedly affect corporate supply chains serving these markets from further pressure on Taiwan, expansionist activities in East Asia, and internal pressure on corporations to support the government's shared prosperity aim. Other participants in such markets will be under pressure to monopolize markets for essential minerals supplying the high-tech and electric car markets.

The COVID-19 pandemic's course on this front has a lot of potential outcomes. One of the more plausible scenarios is that it becomes endemic, joining the other four seasonal coronaviruses, which have been circulating in people for decades or more and are responsible for very mild colds, as the fifth coronavirus to establish itself in humans permanently. Studies on these other seasonal variants have revealed that while they don't mutate as quickly as other viruses like influenza or HIV do, they do mutate quickly enough to reinfect people who have already been exposed to earlier waves. These new varieties would probably be light enough to cause hospitalization and mortality rates more in line with seasonal flu.

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