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Vaccinating a nation: can Biden manage America’s biggest health project?

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Across the US, vast “freezer farms” are popping up — warehouses containing row after row of ultra-cold storage equipment designed to house a vaccine against Covid-19 when one is approved.

These warehouses are the most visible sign of a new supply chain set up in just a few months as public officials and private companies prepare for the imminent arrival of one or more potentially world-changing drugs, at least one of which will have to be stored at temperatures colder than an Arctic winter.

The smooth functioning of this cold supply chain is vital if the US is to be able to offer vaccines to everyone who wants one, as the federal government has promised by next summer.

For president-elect Joe Biden, the vaccine plan is arguably the most important issue that awaits him. His reputation as president will probably be decided in large part by whether he can provide vaccines to enough people to help end the pandemic in a country which has recorded more than 12.2m cases and nearly 257,000 deaths.

Joe Biden and Kamala Harris speak with the Covid-19 Advisory Council during a briefing on November 9 in Wilmington, Delaware
Joe Biden and Kamala Harris speak with the Covid-19 Advisory Council during a briefing on November 9 in Wilmington, Delaware © Angela Weiss/AFP/Getty
If it goes wrong, the vaccine rollout could resemble the debacle that characterised the US response to the early stages of the virus
If it goes wrong, the vaccine rollout could resemble the debacle that characterised the initial US response to the virus © Taimy Alvarez/AP

“This is the most difficult distribution challenge we have ever faced,” says Dusty Tenney, chief executive of Stirling Ultracold, which makes some of the ultra-cold freezers needed to store the Pfizer/BionNTech vaccine at temperatures of -70C. “It is like doing Amazon’s one- or two-day delivery, but using ultra-low temperature products that have never before made it on to the market.”

Distributing a coronavirus vaccine will be a daunting task for every government around the world, especially for developing nations where it is often far harder to guarantee that doses will remain at the kind of low temperatures required for the likely two first vaccines. Oxford university and AstraZeneca’s vaccine, which has received Operation Warp Speed funding, can be stored at normal fridge temperatures, however. 

In the US, the task will be made harder not just by the country’s rugged and often sparsely-populated terrain. Other challenges include a hostile political backdrop where outgoing President Donald Trump has spent the past three weeks contesting the election results, agreeing only on Monday night to start allowing contact between administration officials and Joe Biden’s transition team. 

If it goes wrong, the vaccine rollout could resemble the debacle that characterised the US response to the early stages of the virus, when tests malfunctioned and states bid against each other in the scramble to procure personal protective equipment for healthcare workers.

It could also sow the seeds of the next great American political divide. Already Democrats are accusing the Trump administration of failing to do enough to prioritise vaccinating minority groups, while rural voters who predominantly support Mr Trump are also worried they will miss out.

But if it goes smoothly, allies of Mr Trump hope it could help rescue his reputation for handling the pandemic. And it is even more likely to determine the fortunes of Mr Biden, whose first term will be dominated by the virus and its aftermath.

Angela Rasmussen, a virologist at Columbia University, says: “The Food and Drug Administration has largely got a handle on the approval process; the big worry now for Joe Biden is, how does he distribute a vaccine, how does he do so equitably, and how does he persuade people to get it?”

Mr Biden himself encapsulated his task last week, warning: “How do we get over 300m Americans vaccinated? What’s the game plan? It’s a huge, huge, huge undertaking.”

Donald Trump holds a press conference, flanked by Moncef Slaoui (R), chief adviser to Operation Warp Speed, in September
Donald Trump holds a press conference, flanked by Moncef Slaoui (R), chief adviser to Operation Warp Speed, in September © Saul Loeb/AFP/Getty
Demonstrators pray during a recent protest in Boston, Massachusetts, against government medical mandates
Demonstrators in Boston, Massachusetts, pray during a recent protest against government medical mandates © Joseph Prezioso/AFP/Getty

Fight for supplies

After months of work, the Trump administration published its distribution plans in October. Officials say they will be able to provide vaccines for all vulnerable people — likely to be frontline healthcare workers and older people with underlying illnesses — by the end of the year; all older people by the end of January; and everyone by early summer.

Under those plans, Operation Warp Speed — the vaccine development project the president set up in May — will use a piece of software created by technology company Palantir to track supply and demand in real time. The app, known as Tiberius, promises to give federal officials access to localised data on everything from the location of doses of the vaccines to how many people live in care homes in a given area.

The administration is paying the healthcare logistics company McKesson to oversee the delivery of many of the vaccines, although not the Pfizer one which the pharmaceutical company itself is responsible for — albeit with government money and assistance.

Meanwhile, hundreds of companies, from haulage firms to freezer providers to producers of shipping containers, are bidding for a patchwork of local and federal contracts to help deliver doses. Not only does the vaccine need to arrive in the right place and in the right condition, but so do millions of needles, glass storage vials and PPE for those administering it.

Francesco Incalza, president for Europe, the Middle East and Africa for refrigerated transport company Thermo King, says of the global distribution task: “If the early vaccines are two doses each, we are talking about transporting 5bn of them in the first year — that would need 8,000 Boeing 777 flights.”

Trump officials say the plans, which have been jointly drawn up by the health department and the Pentagon, involve military-level precision. “The logistics are being worked to the minute, in an army-combat approach,” says Moncef Slaoui, head of Operation Warp Speed. “We have tabletop exercises — which are kind of rehearsals — every Friday, in which we identify areas that need more specific solutions. I feel very comfortable that it is incredibly well worked out.”

But Mr Slaoui’s task is to get the vaccine to state-designated distribution hubs: it is up to the states themselves to get them to individuals, through a network of hospitals, community centres and high-street pharmacies.

US vaccination in numbers

$25bn

Sum president-elect Joe Biden promises to spend on vaccine manufacturing and distribution

8,000

Estimated number of flights that will be needed to distribute 5bn doses globally in the first year

42%

Percentage of Americans planning to take a coronavirus vaccine, according to YouGov

This is what Biden advisers say worries them most: that a lack of direction from the federal government risks repeating the situation in spring, when states tried to buy the same items of PPE with little guidance from the federal government, leaving gaps in certain areas. Already there are signs that this is happening.

North Dakota is one of a handful of states that have been running pilot schemes for how vaccine distribution would work, even carrying out dummy runs using doses of flu vaccines.

The state, which has been hit harder than almost anywhere in the world by the virus, has bought four ultra-cold freezers to store the Pfizer vaccine, ignoring the advice of the Centers for Disease Control and Prevention. North Dakota has also bought its own dry ice machine to equip shipping containers in which it will transport doses even to its most rural communities.

But as a vaccine approval has got closer, supplies have been getting harder to come by. “Local providers are having problems getting needles and vials because the federal government is buying them all up,” says Molly Howell, the state’s immunisation programme manager. “There is also definitely a shortage of gloves and N95 masks.”

Dry ice is another concern. Earlier this year there were national shortages of the product, which is a byproduct of gasoline manufacturing, as lockdowns brought cities to a halt and crushed demand for petrol. The US Compressed Gas Association insists there will be enough to get through the winter, but another round of lockdowns could yet put that in peril.

Healthcare workers fill out patient paperwork during a drive-thru flu shot clinic in Shreveport, Louisiana, early this month
Healthcare workers fill out patient paperwork during a drive-through flu shot clinic in Shreveport, Louisiana, early this month © Dylan Hollingsworth/Bloomberg
A protest to call for safe and free Covid-19 vaccines last month in Washington
A protest to call for safe and free Covid-19 vaccines last month in Washington © Bill Clark/CQ-Roll Call/Getty

Fair distribution

Another concern of the incoming Biden team is that minority communities, many of which have been hit hardest by the disease, will not be prioritised. Though a government-commissioned report has recommended making sure black people in particular get the vaccine early, the Trump administration is leaving it up to states to decide exactly how they will allocate their doses.

In a year which has also seen mass uprisings against police violence towards black people, many fear any approach that would further entrench America’s political and cultural divisions.

Andrew Cuomo, the governor of New York, warned this month: “[The Trump administration is] basically going to have the private providers do it and that’s going to leave out all sorts of communities that were left out the first time when Covid ravaged them.” In response, Mr Trump threatened not to distribute the vaccine to Mr Cuomo’s state at all.

Helene Gayle, who co-authored a government-commissioned report on how to distribute a coronavirus vaccine fairly, is one of a number of experts whom Mr Biden’s transition team has consulted in recent weeks. She says: “The planning is just getting started, and there hasn’t been the national leadership this requires. States have been left to themselves.”

Mr Biden has promised to spend $25bn on vaccine manufacturing and distribution, hoping to plug the gaps they say have been left by the Trump plan. But properly identifying those gaps has been made harder by the fact that the president-elect’s advisers have been denied access to administration officials for weeks after the election.

The delay has already prompted warnings from senior officials, including Mr Slaoui, who said earlier this month: “It is a matter of life and death for thousands of people.”

Celine Gounder, a member of the Biden-Harris Covid-19 advisory council, has called for an overhaul of Trump’s ‘Warp Speed’ vaccine effort
Céline Gounder, a member of the Biden-Harris Covid-19 advisory council, has called for an overhaul of Trump’s ‘Warp Speed’ vaccine effort © Amr Alfiky/New York Times/Redux /eyevine
A ‘freezer farm’, a football field-sized facility for storing finished Covid-19 vaccines, under construction in Kalamazoo, Michigan
A ‘freezer farm’, a football field-sized facility for storing finished Covid-19 vaccines, under construction in Kalamazoo, Michigan © Jeremy Davidson/Pfizer/AP

Anti-vaxxer resistance

Even if all that works — if the vaccine is transported safely and in sufficient numbers from factories, to distribution hubs, to local clinics and pharmacies — whether people will agree to have the jab is another question.

An hour outside Bismarck, the capital of North Dakota, where Ms Howell has been toiling away at her state’s distribution plans, Alexis Wangler has been watching the race to get a drug approved with growing concern. Ms Wangler lives in Linton, a small town with about 1,000 residents. Like most of the state, it has been ravaged by coronavirus.

Ms Wangler’s husband believes he had the virus, having suffered fatigue and a loss of smell and taste. His grandmother definitely did, and ended up in hospital with the disease. Her co-worker’s husband is still in hospital — though he is now out of intensive care and no longer receiving supplemental oxygen. Nearly one in 10 North Dakotans have now tested positive for the disease since the start of the pandemic, and 14 per cent of those currently being tested are coming back positive.

However, none of this is enough to persuade Ms Wangler to line up for a shot. “Vaccine makers have said they are in a race to produce it, so that means corners will most likely be cut,” she says. “I’m going to take my chances with my god-given immune system, which has a way better chance of protecting me.”

Ms Wangler is not alone — only 42 per cent of Americans currently plan to take a coronavirus vaccine, according to YouGov, thanks to widespread safety concerns. Some of those are committed anti-vaxxers, many more are simply worried that this approval process has been rushed. That is far below the 70 per cent of people who experts think need to be vaccinated before enough of the population is resistant and to bring the spread of the virus to a standstill.

If Mr Biden wants to achieve herd immunity through a vaccine, he will have to persuade people like Ms Wangler. The problem is she, like most of her neighbours, did not vote for him, and does not trust him on healthcare issues — especially after he and his running mate Kamala Harris warned about vaccine safety concerns during the election campaign.

Despite being one of the states that has suffered most from the pandemic, with more than 72,000 cases, North Dakota’s vote for Mr Trump increased at the last election.

Nor is the state a one-off. An analysis by the broadcaster NPR last week found that Mr Trump increased his share of the vote in 68 out of the 100 counties with the highest Covid-19 death rates per capita — a trend seen across states that voted both Republican and Democrat.

These are the voters who feel they have been left behind by the political class in Washington, and experts warn their alienation with mainstream politics is only likely to grow if they feel they are being bypassed while the rest of the country plots an exit from the pandemic.

A free flu clinic vaccination event in Detroit, Michigan
A free flu clinic vaccination event in Detroit. If Joe Biden wants to achieve herd immunity on Covid-19 through a vaccine, he will have to persuade a growing anti-vaxxer movement © Matthew Hatcher/Getty
North Dakota National Guard soldiers administer Covid-19 tests in Bismarck. Long lines reappeared as the holiday season neared
North Dakota National Guard soldiers administer Covid-19 tests in Bismarck. Long lines reappeared as the Thanksgiving holiday season neared © Tom Stromme/The Bismarck Tribune/AP

A clear departure

Mr Biden’s allies promise he will be the country’s “healer-in-chief”, bringing the country together after a divisive four years under Mr Trump. But the phrase could also be used literally. If Mr Biden wants to be remembered for more than beating Mr Trump, he will have to manage one of the biggest, most complex and most politically-charged healthcare projects ever undertaken by the US government.

“The only comparative thing the healthcare system does right now is roll out a national flu vaccine every year,” says Eric Topol, a cardiologist and professor at Scripps Research Institute, a medical think-tank. “But that is not compulsory, it is not as difficult to handle and is nowhere near as important as a coronavirus vaccine will be.”

Those who have helped shaped Mr Biden’s distribution plans insist the president-elect will be up to the task.

“The fact is that you have a president-elect who has made controlling the pandemic one of his four priorities — that in itself is very different from what we have at the moment,” says Dr Gayle. “Everything is a clear departure from the previous approach.”



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Analysis

Biden hopes to revive long march of women back into US workforce

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When the pandemic arrived in Levittown, Pennsylvania last year, Nicole Heary hurried to readjust her work schedule as a front-end manager at a grocery store so that she could also look after her children.

The 46-year-old single mother of six, including three kids still in school, signed up for a 4am-to-8am shift so that she could be home in time for their remote learning. In the evenings she returned for another four-hour shift. And every weekend she worked, to keep at least two weekdays free to better monitor her children’s virtual classrooms.

Heary did not lose her job because of the coronavirus crisis, unlike 20m other Americans. But she said the experience revealed just how much her career was yoked to the needs of her children — and had been stifled by a lack of support for working parents in the world’s largest economy. 

“Even though I advanced, I would always have to come back, because as moms, we take the hit,” Heary said. “Whenever something happens, when childcare fails, or whatever happens, it’s always Mom,” she added. 

Heary’s travails — and those of millions of struggling households — are what pushed Joe Biden last week to introduce a $1.8tn scheme to pour government funds into childcare, education and healthcare. He calls it the American Families Plan.

As the US economy roars back from the depths of the coronavirus crisis, with expectations that new payroll data will show almost 1m jobs added last month, Biden is making the strongest effort of any recent president to boost female participation in the labour market and improve conditions for women already in the workforce through direct government spending. 

His plan would expand a tax credit for children, offer subsidies for childcare expenses and childcare providers, fund universal pre-kindergarten education, and guarantee paid family and medical leave — social spending where the US has lagged behind many advanced economies. 

“The challenge is that in the United States, we have a labour force where the majority of women are breadwinners or co-breadwinners for their families. And yet, we don’t have the infrastructure to support families that no longer have a full-time stay-at-home caregiver,” said Heather Boushey, a member of the White House Council of Economic Advisers. “We underwent this massive economic transition, but we didn’t adjust the environment [and] the landscape in which families are engaging in the economy.”

Line chart of CPI for urban wage earners and clerical workers (1990=100) showing US childcare costs have climbed

A bitter and intense political fight is expected over the measures and it is far from clear that Biden will prevail, even if polls show the package is popular.

Republicans are criticising the plan for excessive spending, taxing the wealthy to pay for it and even for ruining the social fabric by encouraging parents — and especially women — to leave their children in the care of others. Josh Hawley, the junior Republican senator from Missouri, has blasted the plan as “lefty social engineering”.

“Our public policies should promote the family rather than hurt it, and we can start by giving parents the power to raise their children as they see fit,” he wrote in an article for Fox News last month. “Democrats . . . try to make family life more affordable by pushing both parents into the full-time workforce while subsidising commercial childcare.”

The argument has echoes of the 1970s, when, under pressure from conservative Republicans, president Richard Nixon vetoed legislation that would have created a national child care network on the grounds that it encouraged Soviet-style “communal” child-rearing.

Conservative economists argue the plans will also be counterproductive. “We know the recipe of what is needed to get women back into the workforce, and that is a strong economy, and we had a strong economy not long ago. The policies that contributed to that were lower taxes, less regulations and less government spending,” said Kelsey Bolar of the Independent Women’s Forum, a conservative policy group. 

Line chart of Labour force participation rate (%) showing US women’s participation in the workforce has stagnated

Yet there is little doubt that the long march of American women into the workplace ground to a halt in recent decades. After rising sharply during the 1970s, 1980s and 1990s, female labour force participation hit a peak in April 2000 at 60.3 per cent and has never reached those heights again.

To Biden administration officials, the shortcomings of the US way have been glaring. “Right now families rely on an ad hoc system, there are different standards across states, millions of families live in what are called ‘child care deserts’ where there isn’t even a slot available or sufficient funds available,” Boushey said. “The quality is not good enough for American children.”

Bar chart of % of GDP showing US lags G7 nations in public spending on family benefits

The international comparisons are particularly troubling for the US. According to the OECD, it spends far less than the average of advanced economies on family benefits, while net child care costs as a share of women’s earnings are much higher than average for developed economies. Meanwhile, the US is the only OECD country without any national paid leave benefit. 

“Every woman that wants to be working should have the ability to do that. I think that’s good for our society,” says Beth Bengtson, founder of Working for Women, a charity. “Everybody that’s worked in trying to help women get into the workforce knows these have been tough issues all along. But no one’s actually put something out there and said, ‘Hey, we’re actually going to address this and here’s a way that we could start tackling it’.”

Nicole Heary

In Levittown, Heary’s younger children — aged 7, 8 and 13 — are now back in school five days a week as the economy reopens. She is not naturally drawn to Democratic policies — in fact, she said she is a life-long Republican who voted for Donald Trump in 2016 and for a third-party candidate in last year’s election.

But she backs Biden on this.

“This act does give me a little hope not only for my children’s future, but also for the future of other women in the workforce,” she said. “You know that there may be things in place that would not necessarily require them to gear their careers towards their children, and have to constantly stop and start.” 



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Pharma industry fears Biden’s patent move sets precedent

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Profits in the pharmaceutical industry are protected by a fortress of patents that guarantee drugmakers a stream of income until they expire. On Wednesday, Joe Biden broke with decades of US orthodoxy and made a crack in the wall.

His administration’s decision to support a temporary waiver of Covid-19 vaccine patents prompted instant outrage in the pharmaceutical sector, which argues that the move rides roughshod over their intellectual property rights and will discourage US innovation while sending jobs abroad.

“Intellectual property is the lifeblood of biotech, it’s like oxygen to our industry,” said Brad Loncar, a biotech investor. “If you take it away, you don’t have a biotech sector.”

Biden’s top trade adviser Katherine Tai said that while the US government still “believes strongly” in intellectual property protections, it supported waiving patents for Covid-19 vaccines to help boost global production of jabs.

The move comes as some countries, including India, struggle to tackle further waves of the virus even as others have rolled out successful vaccination campaigns that are driving down infections, hospitalisations and deaths.

The waiver proposal was put forward at the World Trade Organization in October and has since been supported by more than 60 countries who say worldwide vaccine production must increase dramatically. Washington’s support marks a pivotal step in making the proposal a reality and Tai said the US would engage in negotiations to hammer out the details at the WTO.

Tedros Adhanom Ghebreyesus, the WHO’s director-general, told the Financial Times the decision was a “monumental moment” in the fight against Covid-19. “I am not surprised by this announcement. This is what I expected from the administration of President Biden.”

However, the pharma industry did not expect it; the US has tended to fiercely protect domestic companies’ intellectual property rights in trade disputes. Industry leaders described the decision as a heavy blow for innovation that would do little to boost global production because there is a shortage of manufacturing facilities and skilled employees.

In an earnings call Thursday, Stéphane Bancel, chief executive of Moderna, said a patent waiver “will not help supply more mRNA vaccines to the world any faster in 2021 and 2022, which is the most critical time of the pandemic”.

“There is no idle mRNA manufacturing capacity in the world,” he said.

“The administration’s steps here are very unnecessary and damaging,” said Jeremy Levin, chair of biotech trade association Bio. “Securing vaccines rapidly will not be the result, and worse yet, it sets a principle that companies who invested in new tech will stand the risk of having that taken away.”

Shares in the big makers of Covid-19 vaccines were hit by the announcement. Frankfurt-listed shares in BioNTech closed down 12 per cent on Thursday while Moderna and Novavax pared losses after tanking on Wednesday in New York, trading 2.4 per cent lower and 1 per cent lower, respectively. CanSino Biologics, a Chinese private company that developed a single-shot adenovirus-vectored vaccine with Chinese military researchers, fell 14 per cent on Thursday. Fosun Pharma, which has a deal to supply BioNTech vaccines in China, lost 9 per cent.

Sven Borho, a managing partner at OrbiMed Advisors, a healthcare investment company, said pharma executives feared the administration’s move set a precedent that would make it easier to suspend patents in the future.

“They are worried in the long term that this is a foot in the door — ‘OK, we did it with Covid-19, let’s do it with the next crisis, and the next one’,” he said. “And then suddenly it’s a cancer drug patent that needs to be invalidated. They fear it is a mechanism that sets the stage for actions in the future.”

Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, said there was a potential trade-off that pitted the imminent need to contain the pandemic against the risk that drugmakers would be more cautious when investing in pioneering therapies in the future.

“If this action allows for more access and more people to have their lives saved today in 2021 and the consequence is down the road we may not have some new gene therapy for 100 kids, then that’s the trade-off worth discussing,” Bach said.

The battle over intellectual property rights is the first big international patent dispute since a clash over expensive HIV treatments between drugmakers and several countries including Brazil and South Africa in the late 1990s.

Countries struggling to contain the epidemic wanted to make their own generic versions of HIV drugs but the companies who developed them interpreted the moves as a breach of patent agreements, spawning a welter of litigation that frustrated efforts to generate a supply of cheap pills.

Members of the pharmaceutical industry argue that suspending Covid-19 vaccine patents in an effort to boost production abroad will harm jobs in the US biotech sector. Donald Trump’s administration firmly opposed the waiver last year. 

Levin said that US technology “could generate jobs in America but by transferring it abroad there’ll be significant detriment to creating very high quality jobs [here]”.

The mRNA technology used in BioNTech/Pfizer and Moderna’s vaccines is being trialled to treat other illnesses such as cancer and heart disease, and pharma lobbyists have claimed suspending their patents would allow other countries to piggyback on US research breakthroughs.

The long-term consequences are unclear. Umer Raffat, an analyst at Evercore ISI, noted the waiver was not permanent, and that other influential players, including the EU and UK, had not yet supported the Biden administration’s move.

OrbiMed’s Borho said: “This is a unique circumstance. I think this will ultimately be narrow and just on the Covid-19 vaccines. I don’t think the Biden administration wants to undermine broad patents for biotech or the pharma industry.”

Backers of the waiver applauded the US government’s decision as an important step towards boosting the global supply of Covid-19 vaccines.

“The pharmaceutical industry has said the pandemic is no time for business as usual,” said Zain Rizvi, access to medicines specialist at Public Citizen. “Funded by billions in taxpayer dollars, [vaccine makers] have a moral imperative to stop opposing efforts aimed at expanding . . . production.”



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Analysis

Covid paralyses Asia as western economies prepare for blast-off

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Throughout 2020, Asia’s success in controlling Covid-19 made it the champion of the world economy. While Europe and the US were mired in deep recessions, much of Asia escaped with a shallower downturn or even kept growing.

But as western economies gear up for a vaccine-induced rebound which is set to take their output back to its pre-pandemic scale by the end of this year, parts of Asia are still paralysed by coronavirus. As a result, although the region’s output is already above its pre-pandemic level, slower growth is expected in the coming months.

As it launched its new regional outlook last week, the Asian Development Bank said that the region’s economies were diverging and that more Covid-19 waves were a big risk.

“New outbreaks continue, in part due to new variants, and many Asian economies face challenges in procuring and administering vaccines,” said Yasuyuki Sawada, the ADB’s chief economist.

The ADB projected growth of 5.6 per cent across developing Asian economies in 2021, led by growth of 8.1 per cent in China and 11 per cent in India. But the continued threat of coronavirus means risks to that outlook are skewed to the downside.

“Six months ago, or eight months ago, I would have said Asia is going to be ahead of the game because Asia can control Covid,” said Steve Cochrane, chief Apac economist at Moody’s Analytics in Singapore.

But the picture has changed, with India suffering a severe wave of the virus, and cases still high in countries such as Indonesia, the Philippines and Thailand. Thailand is unable to reopen its crucial tourist industry.

More subtly, countries such as Japan are only controlling the virus with restrictions that keep parts of the economy in hibernation. “Some countries need vaccines to control Covid,” said Cochrane. “Others need it so they can open up to international travel and tourism.”

The promise of more than 6 per cent growth in the US this year, as a result of President Joe Biden’s fiscal stimulus, would normally have Asian exporters licking their lips.

Line chart of GDP rebased (2019 = 100) showing Asian economies were less affected by the early stages of the pandemic

The outlook, however, is more subdued than record US growth would usually imply: Americans already bought plenty of goods during the pandemic, while higher US interest rates would mean tighter financial conditions in Asia.

“Adding stimulus at this stage, from the goods perspective, is a real test of whether wants are insatiable,” said Freya Beamish, chief Asia economist at Pantheon Macroeconomics. As the economy opens up, US consumers will probably pay for the services they were denied during lockdown — such as meals out and haircuts — rather than replacing their television again.

There will still be some spillover from the US stimulus, said Beamish, noting that service providers needed equipment, too. “We suspect that people will find new goods to buy and that Asia will benefit from that.” But she added: “We suspect that China will benefit proportionately less from the services recovery than from the manufacturing recovery.”

Whether the extra US demand for goods turns out to be large or small, it is clearly positive. By contrast, higher US interest rates and a stronger dollar would threaten many emerging Asian economies with a repeat of the 2013 “taper tantrum”.

Increased financial integration and foreign currency borrowing mean that the pain of rising US interest rates is quickly felt on the other side of the Pacific.

“A stronger dollar is no longer an unalloyed blessing for Asia,” said Frederic Neumann, co-head of Asia economics at HSBC in Hong Kong. “It helps exports but tightens financial conditions.”

However, inflation is subdued across most of emerging Asia, and the ADB said the risk of a US-induced shock to financial conditions “remains manageable at present”. It said economies such as Sri Lanka and Laos would be vulnerable if such a shock occurred.

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Some Asian economies are well-placed for the next few years, especially Taiwan and South Korea, which are exposed to the semiconductor cycle. “Judging from semiconductor shortages, it doesn’t look like the electronics cycle will break down in the next two or three quarters. That tides them over this rough patch,” said Neumann.

But other Asian economies will find themselves in the less familiar position of relying on domestic demand to grow. One of the biggest question marks is China itself, where first quarter numbers suggest the economy has lost a little momentum.

“Chinese domestic demand still has a way to go,” said Cochrane. “Our forecast right now is for 8 per cent growth in China in 2021, but it depends a lot on policymakers and how quickly they pull back on stimulus and introduce frictions in areas like construction.”



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