The Coronavirus And The Sunshine Economy
Jay Foreman is no stranger to China and the global supply chain. He runs Basic Fun, based in Boca Raton. It imports toys like My Little Pony Classic and Pound Puppies from China. A dozen Basic Fun employees work in China and 65 work in Hong Kong.
Foreman was in Hong Kong in mid-December just as one threat to his business was eliminated. For months, he had been preparing for a 15 percent tariff on toys made in China and imported into the U.S. The Trump Administration cancelled the tariff just days before Foreman landed in Hong Kong.
He left a month later, in mid-January, as worries about the new coronavirus grew. Since returning, he has turned into an exporter of sorts, shipping over 6,000 of the N-95 respirator face masks to his Chinese employees.
About 90 percent of Basic Fun’s toys come from China. None of the companies it contracts with to make its toys are in the epicenter of the outbreak, but he doesn’t know how the quarantines and limits on travel are going to impact workers at those plants in the weeks ahead. In order for toys to be in stores and available online for the holidays, typically they're manufactured in the spring and on cargo ships by the summer months.That includes the parts for the toys American companies make for Basic Fun like its K’Nex line. K’Nex are kits of rods and connectors for kids to put together into different objects. The K’Nex parts connect with each other to build something larger. They are a tangible representation of the global trade that makes them possible, and an example of the risk COVID-19 poses to the global supply chain and other connections that Florida's economy relies upon.
The first concern is public health, followed the financial vulnerabilities because of the outbreak and fears of it widely spreading.
"We won't be isolated from it," said Amy Baker, coordinator of the Florida Office of Economic and Demographic Research. "We know whenever you have a natural disaster in Florida, or even Zika, you can see spillover effects back to tourism."
It's unclear how the economic impact of coronavirus will ultimately compare to that of the Zika virus. Zika was localized, but it did lead to a drop in airline and hotel bookings for a short time in the late summer of 2016. But travel quickly rebounded, just as it did after the Great Recession. Over 100 million tourists visited Florida during the first nine months of 2019.
"What we saw at the end of the day is that the super strength in tourism was offsetting the weaknesses elsewhere so we were able to say overall we were back to normal much quicker than we otherwise would have been," Baker said. "We know because it's so strong, it's also a source of vulnerability to us."
Asia is not a big source of international tourists for Florida, though. Only about one out of every 50 international visitors came from China in 2016, according to available data from Visit Florida, the state's tourism marketing agency. Canadian, British and Brazilian visitors have dominated foreign guests visiting Florida.
Neither is China a significant source of buyers for South Florida real estate. However, the turmoil in the investment markets brought on by worried over COVID-19 could have ripple effects in the housing market. "The indirect impact of the stock market pulling back has created some psychological impacts that have given people some pause," said Coldwell Real Estate agent Danny Hertzberg. "The financial markets aren't always directly in sync with the individual real estate markets. But overall, when people see that their stock holdings are down, they are sometimes less willing to make those purchases."
South Florida is the top real estate target in the U.S. for foreign buyers, but buyers from Buenos Aires, Bogota or even Boston are more influential than those from Beijing. As for local home buyers, Hertzberg pointed out a consequence of the stock market volatility has been a drop in mortgage loan interest rates to historic levels. "That makes a big difference. It's how much they can afford. It's the price point they're going to go to. And it might be the difference of waiting another year or purchasing now to lock in a low morgage rate."
Sheng Guo, an economist who has taught at FIU since 2008 and lives in Weston,has a unique perspective. He's from the region in China where the outbreak began, and still has family there. His parents and grandmother have been quarantined since January 23. "Their current situation is better than I would have expected because they still get their food -- green vegetables, their fruits -- through online purchase and delivered overnight," Guo said. "They said that the price has doubled in some cases."
Guo may be thousands of miles away from the epicenter of the outbreak, but it has affected his more immediate family. He said his wife, a faculty member of the FIU business school, is scheduled to attend a large academic conference this month in Orlando. "And now she's worried about from which countries are these attendees coming from? "
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