Hyperconverged pioneer Nutanix is once again starting to falter. At the start of 2020, the outlook was much rosier after a slump in August 2019. Stocks rebounding by approximately 83%. Speculated improvement stemming from greater confidence in their transition from software to subscription services . Nutanix exhibiting a 97% retention rate on their subscription services is promising . Back in January, the threat of the COVID-19 (Coronavirus) was dormant. Its impact on commerce is now a matter of concern for the tech industry.
“Nutanix shares sank as much as 24% in extended trading on Wednesday after the developer of cloud storage and networking software cited coronavirus concerns as one reason for lowering its 2020 revenue outlook”
This resulting in the company’s lower revenue projections from $1.3- $1.4 billion to $1.29 -$1.36 billion . 22 % of Nutanix’s 2019 revenue came from Asia . This is problematic due to Asian countries being profoundly impacted by this emergent illness. Nutanix is far from the only tech company that grappling with the economic complications of the COVID-19 outbreak. Both Apple and Microsoft have indicated that they will not meet their quarterly business goals . Fears of the virus certainly have sullied sales prospects industry-wide. The reverberations are also being felt on the opposite side of the supply-chain. Considering 73 percent of all of Microsoft’s components are manufactured in China . One of the world’s prominent production hubs being the epicenter for an obscure virus is disastrous.
Naturally, the economic stress engendered by COVID-19 is not relegated to the tech sector. Substantial downturns have been estimated for other industries as well. For instance, the hospitality sector is anticipating stalls in sales internationally  . The constraints on the economy may stretch beyond restricting the supply in some sectors and reducing demand in others. Countries are stifling commerce through various restrictions to prevent the spread of COVID-19. In the United States, it has even been stated that measures such as quarantining entire cities . At first, glance does appear to be slightly excessive. Especially considering how much more pervasive the Flu is when compared to COVID-19 . The perceived threat seems to stem more from the obscurity and ambiguity of COVID-19. Mirroring the reactionary stances taken in the event of an outbreak of communicable diseases. Regardless of whether this outbreak is truly a world health crisis or not, its impact on the economy will be all too real.
Placing restrictions on the flow of foreign goods will prove to be detrimental. Whether those restrictions are through tariffs or pragmatic embargoes to prevent the spread of disease. All modern economies are heavily reliant on imports. Not due to callous self-interest, but out of the virtue of efficiency. Comparative Advantage has allowed for intense specialization which enables countries to focus on the production of specific types of goods and services. Thank you, David Ricardo. Concentrated specialization has lead to increases in product quantity and quality. Whatever you cannot produce can be acquired through trade. Hence, why 60% of our global productivity is dependent on international trade . Making it imperative that all restrictions placed on international trade be necessary. Per the AIER article Economic Policy Must Prepare for Pandemic Disease :
“What we do not see are the infinitely complex ways that productive structures depend on smoothly functioning markets that could all face deep disruption.
Efforts to examine the possible economic impact are few but a 2006 Congressional Budget Office study suggested that a 1918-style pandemic today could drop GDP by 4.25%, which would put the economy in painful recession territory” .
Granted these findings are theoretical and most likely retrieved from economic models, still eye-opening. COVID-19 can present a serious risk to the United States. However, the benefit of being cautious needs to be weighted in relation to economic losses. Is it worth the losses in productivity to attempt to secure the U.S. against this virus? There are already confirmed cases here in the United States. There is little to stop COVID-19 from spreading. Quarantines and trade embargoes with nations that have confirmed cases cannot guarantee the number of cases domestically will not rise. Such measures only create a false sense of security. What isn’t speculative is production shortages, an increase in prices, and even the loss of jobs. Imports are the lifeblood of our advanced economy. Putting up barriers to our trading partners is merely cutting off circulation to the arteries.
As the quote above indicates, what initially seems reasonable doesn’t always work. Superficially, trade restrictions seem like a great way to curb the spread of this disease. Taking this course of action ignores the consequences downstream. It could even be said it lacks foresight. It is ineffective and impractical to produce all the goods that we utilize domestically in production. There is a reason why Target purchases its plastic lawn furniture from vendors in China. If produced domestically the same products would be triple the price and not maintain a level of quality commanding such a price tag. It becomes quite evident how a chain of such events could be harmful to the entire economy.