How China’s novel coronavirus outbreak is disrupting the global supply chain
The Trump administration’s “turbocharging” is an initiative to remove global industrial supply chains from China as new US trade tariffs are prepared to punish Beijing for failing to cope with the coronavirus outbreak, according to officials familiar with US plans..
President of the U.S.A Donald Trump, who stepped up pressure on China ahead of the November 3 presidential elections in the United States, has long promised to return production to the country from abroad.
The current economic disruption and massive death toll from the coronavirus pandemic in the United States is causing nationwide efforts to crowd out dependence on U.S. manufacturing and supply from China, even if instead it is about other friendlier countries, current and former senior officials say. US administration.
«We have worked to shorten our supply chains from China over the past few years, but now we are actively developing this initiative», – stated Kate Crutch, Deputy Secretary of Economic Growth, Energy and Environment at the US State Department.
«I think it is important to understand where the critical areas are and where the critical bottlenecks exist», – said Crutch, adding that the issue is key to US security and the government may announce new actions soon.
The US Department of Commerce, government and other departments are looking for ways to push companies to withdraw sourcing and manufacturing from China. Tax breaks and potential repeat subsidies are some of the measures being considered to spur change, current and former officials told Reuters..
«A number of government efforts are aimed at this.», – emphasized one of them. Agencies are figuring out which production should be considered «necessary» and how to produce these goods outside of China.
Trump’s Chinese policy has been defined by a behind-the-scenes struggle between trade advisers and hawks over China – the latter now say their time has come.
«This moment is the perfect storm. Pandemic crystallizes all fears people have about doing business with China», – said another senior US official.
«All the benefits that people received by concluding deals with China before are now many times overshadowed by the economic damage from the coronavirus.», – said the official.
Trump has repeatedly stated that he may supply new trade duties on top of the 25% tax on Chinese goods in the amount currently in effect..
American companies that pay trade duties are already groaning here under the yoke of existing ones, especially as sales are falling during the coronavirus quarantine..
But that doesn’t mean Trump will ditch new ones, officials say. Other ways to punish China could include sanctions against officials or companies, as well as a closer relationship with Taiwan..
But discussions on decisions to move supply chains are specific, robust, and, unusually for the Trump administration, multilateral..
United States insists on forming an alliance «reliable partners», named «Economic Prosperity Network», said one of the officials. It will include companies and civil society groups operating according to the same set of standards across everything from digital business, energy and infrastructure to research, trade, education and commerce..
The U.S. government is working with Australia, India, Japan, New Zealand, South Korea, and Vietnam to «move the global economy forward», said the secretary of state on April 29 Mike Pompeo.
These discussions include that, «how are we restructuring … supply chains to prevent something like this happening again», – said Pompeo.
Latin America can play a role here too.
Last month the Ambassador of Colombia Francisco Santos said he is in talks with the White House, the National Security Council, the US Treasury Department and the US Chamber of Commerce on how to encourage US companies to move some supply chains from China to his country.
In 2010, China overtook the United States as the world’s largest industrial country, and accounted for 28% of global production in 2018, according to the UN..
The pandemic has highlighted China’s pivotal role in the generic drug supply chain that makes up the majority of prescriptions in the United States. The situation also highlighted the dominance of China in commodity groups such as thermal cameras needed to screen workers for fever, as well as importance in the area of food supplies..
Many US companies invest heavily in Chinese manufacturing and rely on 1.4 billion people in China to generate a significant proportion of their sales..
«Diversification and some redundancy in supply chains would make sense given the level of risk the pandemic has exposed, said Doug Barry, Representative of the US-China Business Council. – But we do not see massive excitement from companies doing business in China».
John Murphy, Senior Vice President for International Policy at the US Chamber of Commerce, said US manufacturers already meet 70% of current pharmaceutical demand.
It could take five to eight years to build new facilities in the United States, he said.. «We are concerned that officials need to get the facts right before they start looking for alternatives.», – said Murphy.
Trump’s White House intentions to punish China have not always been accompanied by action.
For example, an attempt has yet to be completed to block global chip exports to Chinese telecommunications giant Huawei, which is on a blacklist endorsed by hawks in the administration and has been pending since November..