(The Center Square) – Oil prices plummeted to $20.37 a barrel during Wednesday trading, the lowest since 2002.
Mexico is the largest trading partner of Texas and the United States. It is seeing a significant production slowdown because of factory closings in and reduced output from China.
As a result, the coronavirus and its repercussions are expected to do a number on the Texas economy, the world's tenth-largest.
How much of an impact of the virus on the state's economy is unknown. Unlike in trade wars, where the focus is on specific products, the shuttering caused by the virus is unpredictable.
"COVID-19 will have an impact on the border region," Salvador Contreras, director of the Center for Border Economic Studies as the University of Texas Rio Grande Valley, told The Center Square. "However, the region’s biggest threat is the oil shock and Mexico’s economy. Mexico and Texas will be badly hurt by $30 oil. Mexico will most likely contract in 2020 and face a weaker currency. This is likely to mean fewer Mexican shoppers. Retail trade makes up 13% of total employment and 10% of leisure and hospitality in the Rio Grande Valley."
President Donald Trump has mentioned closing the border between the U.S. and Mexico to help stop the spread of the virus, but he has since backed off that proposal.
"Even if we can imagine a scenario where the border is closed, it will most likely not include commerce," Contreras said. "We can look at recent travel bans from Europe as an example."
The disruption in the global supply chain is the primary factor that would cause disruption.
“About 1 million jobs in the Texas economy are dependent on international trade," Rep. Rafael Anchia, chairman of the Texas House Committee on International Relations and Economic Development, told the Texas Tribune. "It is impossible to contemplate that there could be no impacts and further, more dramatic impacts.”