Issue #2: Trump has plan to remove US dependency on China supply chain

(by Humeyra Pamuk, Reuters) WASHINGTON  – The Trump administration is “turbocharging” an initiative to remove global industrial supply chains from China as it weighs new tariffs to punish Beijing for its [deceitful] handling of the coronavirus outbreak, according to officials familiar with U.S. planning. [See “China Hid Coronavirus’ Severity To Hoard Supplies”].

President Donald Trump, who has stepped up [criticism of China as a result of China’s handling of the coronavirus], has long pledged to bring manufacturing back from overseas.

Now, economic [damage] and the U.S. coronavirus death toll are driving a government-wide push to move U.S. production and supply chain dependency away from China, even if it goes to other more friendly nations instead, current and former senior U.S. administration officials said.

“We’ve been working on (reducing the reliance of our supply chains in China) over the last few years but we are now turbo-charging that initiative,” Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the State Department told Reuters. …

The U.S. Commerce Department, State Department and other government agencies are looking for ways to push companies to move both sourcing* and manufacturing out of China. Tax incentives and potential re-shoring subsidies are among measures being considered to spur changes, the current and former officials told Reuters. [*Sourcing is buying parts for a product from a company; e.g. a U.S. automaker purchases car parts from manufacturers in China]

“There is a whole of government push on this,” said one. Agencies are probing which manufacturing should be deemed “essential” and how to produce these goods outside of China.

“This moment is a perfect storm; the pandemic has crystallized all the worries that people have had about doing business with China,” said another senior U.S. official.

Many U.S. companies have invested heavily in Chinese manufacturing and rely on China’s 1.4 billion people for a big chunk of their sales.

“All the money that people think they made by making deals with China before, now they’ve been eclipsed many fold by the economic damage” from the coronavirus, the official said.

Discussions about moving supply chains are concrete, robust, and…multi-lateral.

The United States is pushing to create an alliance of “trusted partners” dubbed the “Economic Prosperity Network,” one official said. It would include companies and civil society groups operating under the same set of standards on everything from digital business, energy and infrastructure to research, trade, education and commerce, he said.

The U.S. government is “working with our friends in Australia, in India, in Japan, New Zealand, Republic of Korea, and Vietnam to share information and best practices as we begin to move the global economy forward,” Secretary of State Mike Pompeo said April 29.

“Our conversations certainly involve global supply chains, keeping them running smoothly, and getting our economies back to full strength, thinking about how we restructure these supply chains to prevent something like this from ever happening again,” Pompeo said.

Latin America may play a role, too. Colombian Ambassador Francisco Santos last month said he was in discussions with the White House, National Security Council, Treasury Department and U.S. Chamber of Commerce about a drive to encourage U.S. companies to move some supply chains out of China and bring them closer to home.  [He said Colombia was an ideal site for U.S. companies seeking to reduce their reliance on supplies from China.].

China overtook the United States as the world’s top manufacturing country in 2010, and was responsible for 28% of global output in 2018, according to United Nations data.

The pandemic has highlighted communist China’s [critical] role in the supply chain for generic drugs that account for the majority of prescriptions in the United States, [as well as medical equipment] and its importance in food supplies.

Published by Reuters .com on February 8, 2020. Reprinted here for educational purposes only. May not be reproduced on other websites without permission from Thomson Reuters.