The S&P 500 lost an estimated $1.7 trillionover two days as investors' concerns over the new coronavirus continue to grow. MIT economist Jonathan Gruber told Boston Public Radio on Wednesday that the stock market in America seems so volatile over an illness that started in China because of the integration of global markets.
"It speaks directly to the impact of a trade war with China and our relations. The notion was always wrong that in some sense we could punish China by imposing tariffs because so much of what we make has parts from China," he said. "When that chain is broken because of things like the coronavirus getting in the way of transporting things like goods and people, it fundamentally affects the US economy, and this is in some sense a dry run of what a real trade war could look like."
Gruber said the economic slowdown would not only impact general trade of goods and services, but also the pharmaceuticals industry.
"There are at least 20 drugs where the components exclusively come from China," he said. "So not only do we worry about trade and goods, if we want to create drugs that cure illness, and we shut down trade with china, suddenly we'll have drug shortages on our hands."
Jonathan Gruber is Ford Professor of Economics at MIT. He was instrumental in creating both the Massachusetts health-care reform and the Affordable Care Act. His latest book is "Jump-Starting America How Breakthrough Science Can Revive Economic Growth and the American Dream."