Trump administration pushes to tear China’s global supply chains – officials

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WASHINGTON (Reuters) – The Trump administration is “supercharging” an initiative to cut China’s global industrial supply chains as it weighs new tariffs to punish Beijing for managing the epidemic of coronavirus, according to officials familiar with American planning.

President Donald Trump, who intensified the recent attacks on China before the US presidential election on November 3, has long been committed to bringing manufacturing overseas.

Now, the economic destruction and the huge number of deaths from coronaviruses in the United States are pushing the government to shift the dependence of the US production and supply chain away from China, even if it goes rather to other friendlier countries, said current and former US administration officials.

” We have worked on [reducing the reliance of our supply chains in China] in the past few years, but we are overeating this initiative, “Keith Krach, under secretary for economic growth, energy and environment at the US State Department, told Reuters.

“I think it is essential to understand where the critical areas are and where the critical bottlenecks exist,” said Krach, adding that the issue was essential to the security of the United States and that the government could announce new measures soon.

The US Department of Commerce, the state, and other agencies are looking for ways to push companies to outsource both supply and manufacturing outside of China. Tax incentives and potential subsidies for re-shoring are part of the plans to spur the changes, current and former officials told Reuters.

“There is a government-wide push on this,” said one. The agencies are trying to determine which manufacturing should be considered “essential” and how to produce these products outside of China.

Trump’s policy in China has been defined by backstage disputes between pro-trade advisers and Chinese hawks; now they say the time has come.

“This moment is a perfect storm; the pandemic has crystallized all of people’s worries about trade relations with China, “said another senior US official.

“All the money people think they made by signing deals with China before, now they have been overshadowed many times by the economic damage” from the coronavirus, said the official.

ECONOMIC PROSPERITY NETWORK

Trump has repeatedly said that he could put new tariffs on top of the tax of up to 25% on $ 370 billion (£ 296 billion) of Chinese products currently in place.

US companies, which pay the tariffs, are already groaning here under existing tariffs, especially as sales plummet during coronavirus blockages.

FILE PHOTO: Chinese and American flags fly near the Bund, before the US trade delegation meets its Chinese counterparts for talks in Shanghai, China, July 30, 2019. REUTERS / Aly Song / File Photo

But that doesn’t mean Trump will balk at new ones, officials say. Other means of punishing China may include sanctions against officials or businesses and closer relations with Taiwan, the autonomous island of China, considered a province.

But discussions on moving supply chains are concrete, robust and, exceptionally for the Trump administration, multilateral.

The United States is pushing to create an alliance of “trusted partners” called the “Economic Prosperity Network,” said an official. It would include businesses and civil society groups operating according to the same set of standards on everything from digital businesses, energy and infrastructure to research, commerce, education and commerce, he said. -he declares.

The US government is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “advance the global economy,” Secretary of State Mike Pompeo said on April 29. .

These discussions are about “how we are restructuring … supply chains to prevent this from happening again,” said Pompeo.

Latin America can also play a role.

Colombian Ambassador Francisco Santos said last month that he was in talks with the White House, the National Security Council, the United States Department of the Treasury and the United States Chamber of Commerce regarding a campaign to encourage American companies to move certain supply chains out of China and bring them closer to home.

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

The pandemic has highlighted China’s key role in the supply chain of generic drugs, which account for the majority of prescriptions in the United States. He also showed China’s dominance in products like the thermal imagers needed to test workers for fever here, and its importance in food supplies.

DIFFICULT SALE FOR COMPANIES

Many American companies have invested heavily in Chinese manufacturing and rely on 1.4 billion Chinese people for a large part of their sales.

“Diversification and some redundancy in supply chains will make sense given the level of risk that the pandemic has exposed,” said Doug Barry, spokesperson for the US-China Business Council. “But we don’t see a rush to exit companies doing business in China. “

John Murphy, senior vice president of international policy at the American Chamber of Commerce, said that American manufacturers already meet 70% of current pharmaceutical demand.

FILE PHOTO: The containers of the Chinese companies China Shipping and COSCO (China Ocean Shipping Company) are loaded on a container as it leaves the port of Hamburg, Germany, on March 11, 2020. REUTERS / Fabian Bimmer / File Photo

Construction of new facilities in the United States could take five to eight years, he said. “We are concerned that public servants must get the right sets of facts before they start looking for alternatives,” said Murphy.

Trump’s White House promises to punish China have not always been acted upon.

A decision to block global chip exports to Chinese blacklisted telecom giant Huawei, for example, favored by administration hawks and contemplated since November, has yet to be finalized.

Additional reports from Alex Alper, David Lawder, Matt Spetalnick and David Brunnstrom; Written by Heather Timmons; Editing by Tom Brown

Our standards:Principles of the Thomson Reuters Trust.

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