Increased drought is anticipated to be the next major danger to the economy.

What do China's industrial closures, Europe's shipping bottlenecks, and the United States' decreased agricultural output have in common? They are all being brought on by severe droughts that are affecting the biggest economies in the world. The dry spells, according to researchers, are a result of both soil degradation and climate change as well as seasonal weather patterns like La Nia.

Snapshot: A number of major global manufacturers, including Apple (AAPL), Foxconn (OTCPK:FXCOF), Toyota (TM), and Volkswagen, will be impacted by the Chinese province of Sichuan's recent announcement that it will extend industrial power outages and activate its highest emergency response (OTCPK:VWAGY). The Yangtze, which is the longest river in Asia and is extremely important, has dropped to its lowest level on record for August, which has an impact on the hydroelectric supply and results in severe shortages. Since over a dozen of its suppliers are currently unable to operate at full capacity, Tesla (TSLA) has even requested assistance from the government to ensure they have access to enough electricity.

The Rhine's critically low levels have forced cargo ships across Europe to lower their loads. The Po River in Italy has even been declared a state of emergency. Ships bringing raw materials to manufacturers and power plants often use the canal. Separately, American agricultural experts now predict that farmers will lose more than 40% of their cotton crop, and many acres of farmland are going fallow due to water shortages. In fact, the U.S. Bureau of Reclamation has declared that due to the worsening megadrought in the Southwest, states like Arizona and Nevada would have to reduce their water allotments by as much as 21% in 2019.

Go further Given the reduced use of hydro and nuclear power due to the lower water levels, the situation can cause energy prices to increase (that cannot sufficiently cool reactors). Food prices could increase as a result of increased transportation costs and supply chain bottlenecks, adding to inflationary pressures already present in the global trade system brought on by the coronavirus epidemic.