Trump administration steps up initiative to withdraw supply chains from China and looks at new tariffs over new coronavirus

The Trump administration is stepping up an initiative to withdraw supply chains from China while considering imposing new tariffs against Beijing for its handling of the coronavirus pandemic, according to officials close to U.S. plans, Reuters reports.

President Donald Trump, who recently stepped up attacks on China ahead of the November 3 presidential election, has long pledged to repatriate production from abroad.

Now, the economic damage and the massive number of cases of infections with the new coronavirus in the United States are putting a lot of pressure on the government to reduce economic dependence on Chinese production and supply, even if it’s transferring to other friendlier nations, current and former Senior U.S. administration officials said instead.

“In recent years we have been working to reduce the dependence of our supply chains in China, but now we are stepping up this initiative strongly,” said Keith Krach, undersecretary for growth, energy and the environment in the State Department.

The U.S. Department of Commerce, the federal state and other agencies are looking for ways to get companies to transfer their supplies and production from China. Fiscal stimulus and potential recovery subsidies are among the measures being considered to stimulate change, current and former officials said.

“There is full pressure from the government in this regard,” one official said.

Trump has repeatedly said he could impose new tariffs above the current 25 percent tariff on imports from China worth $370 billion annually.

U.S. companies, which already incur tariffs, are unhappy, especially as sales fell during the restrictions adopted by authorities because of the new coronavirus.

That doesn’t mean Trump won’t impose new tariffs, officials say. Other ways to penalize China may include sanctions on officials or companies in the country and closer relations with Taiwan, the self-governing island that China considers a province.

But the discussions about moving supply chains are concrete, solid and, unusually for the Trump administration, multilateral.

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

The United States government is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “push the global economy forward,” Secretary of State Mike Pompeo said, April 29.
These discussions include “how we restructure … supply chains to prevent this from happening again,” Pompeo said.

Latin America can also play a role.

Colombia’s ambassador, Francisco Santos, said last month that he had discussed with the White House, the National Security Council, the U.S. Treasury Department and the U.S. Chamber of Commerce about an action to encourage U.S. companies to move some supply chains out of China and get closer to home.

In 2010, China surpassed the United States as the world’s largest manufacturing country, and in 2018 was responsible for 28% of global production, according to United Nations data.

The pandemic highlighted China’s key role in the supply chain for generic drugs, which account for the majority of medical prescription treatments in the United States. It also showed China’s dominance in products such as thermal chambers needed to test workers for fever and its importance in food supplies.

Many U.S. companies have invested heavily in Chinese production and rely on the 1.4 billion Chinese for much of their sales.

“Diversification and some redundancy of supply chains will make sense, given the level of risk that the pandemic has brought to the surface.” But we don’t see any rush for the outings of companies doing business in China,” said Doug Barry, spokesman for the U.S.-China Business Council.

John Murphy, vice president of international policy at the U.S. Chamber of Commerce, said U.S. manufacturers already meet 70 percent of the country’s current pharmaceutical demand.

Construction of new production facilities in the United States could take five to eight years, he said.

“We are concerned that officials must first obtain accurate data before they begin to examine alternatives,” Murphy added.

The White House’s commitments to penalize China have not always been followed by concrete action.

For example, the move to block chip exports to Chinese group Huawei, backed by more radical members of the Trump administration, has been under review since November, but has not yet been completed.

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