Shanghai reinstated strict lockdowns across the city in response to the recent rise in Omicron variant cases, The Wall Street Journal reports. Despite the efforts companies have made to resume production, transportation and logistics, all operations have been disrupted, sparking concerns over global supply chain issues.
"We’re closely monitoring for any supply chain effects and will continue our work to keep U.S. supply resilient in the face of pandemic-related shocks," U.S. Secretary of Transportation Pete Buttigieg said in a tweet.
According to The Wall Street Journal, authorities have shut down public transportation and ordered citizens of the eastern half of the city to stay home from March 28 through 31 while they undergo a "testing blitz."
Officials in Shanghai have also scheduled massive closures on April 1. Some companies, including Tesla, have ceased production in the city, while others, such as Semiconductor Manufacturing International Corp., are keeping their factories and plants open under "closed-loop production," meaning workers must live on the factory campus, The Wall Street Journal reported.
Although Shanghai's international port has remained open so far, the lockdown restrictions are impacting truckers, warehouses and other links in the supply chain. The restrictions have caused inconvenience for drivers, who are struggling to move products from warehouses to ports. Another complicating factor is that oil prices have driven up the cost of trucking in China by as much as 10%, according to The Wall Street Journal.
“Many drivers worry that they can transport the goods to the port, but cannot return from the port because of the stringent pandemic restrictions,” Zou Xiaodong, vice general manager at Shanghai Gangxian International Freight Forwarding Co., Ltd., said, according to the WSJ report.
Holding one of the world’s strongest economies, the company accounts for 28.7% of all global manufacturing output, according to The American Prospect. The U.S. is responsible for 16.8% of global manufacturing output.
“China is getting better at managing the shocks, but the shocks are getting bigger,” Hong Kong-based Goldman Sachs Chief Economist Hui Shan said.
The delays caused by the extreme COVID-19 measures have caused a disruption across the global supply chain and increased the cost of many goods.
"We can think of no risk to the global economy, excluding nuclear warfare, that is greater than the risk of a COVID outbreak in China that shutters industrial production,” High Frequency Economics’ Carl B. Weinberg said in a report quoted by the Associated Press earlier this month. “Uncountable manufacturing supply chains pass through China.”