Stretched U.S. supply chains face further disruption as the omicron variant of the coronavirus spreads through Asia, threatening to curtail production in China, the world's manufacturing powerhouse.

Though they are relatively modest for now, the number of cases is rising across Asia. India is furthest along the line with the seven-day average daily rate jumping to over 249,000 cases as of Jan. 18, up from fewer than 12,000 at the end of 2021, according to Our World in Data. The Philippines, Thailand and Japan have also seen upswings but most worrying are the outbreaks in China, notably in Tianjin, Shenzhen and Beijing. In the U.S., average daily new cases are over 740,000, portending a similar surge in Asia.

The pandemic has ruptured the globalized logistical networks that had seamlessly moved goods around the world. U.S. inflation has spiked to a 40-year high as businesses are unable to meet the demand for consumer goods and have to absorb high energy and shipping costs. Staff absences have worsened the plight of U.S. manufacturers and retailers as omicron rips through the country. Asia's latest wave of infections may compound these woes, with HSBC forecasting "the mother of all supply chain stumbles."

"Omicron is very likely to lead to serious outbreaks in the region," Louis Kuijs, head of Asia economics at Oxford Economics, said in an email. "This will probably cause economic disruption."

Asian factories produce many of the components that go into American manufacturing, such as semiconductors and computer chips, as well as the mobile phones, computers, clothes and shoes that go into American retail stores.

China is a crucial trade partner for the U.S., accounting for 40.3% of American imports in 2021, according to Panjiva, a supply chain-focused unit of S&P Global Market Intelligence. The country has a zero-tolerance approach to COVID-19, including mass testing, contact tracing and quarantines to stamp out outbreaks. This has proven to be effective in keeping the number of cases and deaths down but had severe impact on global supply chains.

Countries such as Vietnam and Malaysia imposed similarly strict lockdowns to contain the virus in previous waves of infection, causing major disruptions to production for sectors such as footwear, to the cost of Adidas AG and Nike Inc.

Such measures reduced transmission and allowed manufacturing to recover quickly. Activity continues to expand in most countries, according to the latest purchasing manager's indexes.

This improvement had been feeding through to the U.S., where supply chains appeared to be past the worst. The Institute for Supply Management's Supplier Deliveries Index softened in November and December 2021, meaning that while delivery times from suppliers continued to slow, they did so at a reduced rate compared to the previous month. A score of 50% indicates stability, with anything higher than that indicating slowing deliveries. The December result was well above that at 64.9%, though much lower than the peak of 78.8% in May 2021.

China is 'all that matters'

Analysts do not expect most Asian governments to take such stringent measures this time, partly due to rising vaccination rates and partly due to the extremely transmissible nature of the omicron variant.

"Governments such as those of Malaysia and Vietnam have learnt from the disruption in 2021 and are keen to avoid it," Kuijs said. "As a result I would expect significantly less supply chain disruption in these countries than last year."

There is one crucial exception.

"One key risk to supply chains in Asia, and globally, comes from zero-COVID approaches in China," Vishrut Rana, an economist at S&P Global Ratings, said in an email. "There is a risk that outbreaks could emerge in coastal Chinese cities that are key parts of the global shipping network."

Economists expect Chinese authorities to persist with there zero-COVID-19 strategy, as it has exhibited recently with the port restrictions at Ningbo, Zhejiang Province.

"China is the exception in that it is very unlikely to move away from its current 'zero-COVID' approach," Kuijs said. "The tendency to implement rigid restrictions and lockdown in the case of outbreaks means its economy remains particularly vulnerable to omicron."

The port of Ningbo accounted for 7.6% of the trade from China to the U.S. in 2021, supplying retailers Goplus Corp. and Dollarama Inc. and auto parts importer Advanced Innovative Manufacturing Inc., according to Panjiva.

"If China does start shutting ports in Dalian [near to Tianjin] and Shenzhen then the West is definitely going to feel that in both delays to orders, and also even higher unit costs for logistics," Rob Carnell, head of research and chief economist, Asia-Pacific at ING, said in an email.