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Trump Administration Plans on Moving Supply Chains Out of China and Building a New Network

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The US officials related to the US-China trade policy revealed that president Donald Trump is keen on moving manufacturing and distribution channels out of China. Mr. Trump pledged to punish China for “intentionally concealing the severity” of the deadly contagion, Covid-19, which in his opinion transformed what could have been an epidemic into a pandemic. According to Johns Hopkins University, the novel coronavirus, which Mr. Trump continuously refers to as Chinese virus infected more than 3.5 million people and took about 247,000 lives.

If the recent move aiming re-construction of supply chains gets implemented, it would escalate the tensions between US and China, shooting friction at its peak. Many trade analysts believe that with ongoing health crisis, looming US presidential election and plummeting economy, the diplomacy between the two nations might take an uglier turn.

“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. I think it is essential to understand where the critical areas are and where critical bottlenecks exist,” Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the U.S. State Department told Reuters. Krach added the US could announce an action against China soon as the matter is linked to maintaining US security. Mr. Trump has repeatedly stressed that he would impose more sanctions against Chinese imports, which would be an addition to 25% tax on $370 billion in Chinese goods currently in place.

The US Commerce Department, State and other agencies are devising ways including subsidies and incentives, to move factories (especially ones related to essential goods) from China to friendlier nations. The government is looking at re-constructing a network of “trusted partners” to be called as “Economic Prosperity Network.” Secretary of State Mike Pompeo during a media briefing on April 29 said that the US government was thinking of working with Australia, India, Japan, New Zealand, South Korea and Vietnam in order to “move the global economy forward”. He added that the discussions with these nations majorly include “how we restructure … supply chains to prevent something like this from ever happening again”.

The current US strategy of pinning China down, might do Trump administration more harm than good. Uprooting of the supply chains, especially when the world is battling the worst health and economic crisis, might not be a very good idea. Many analyst highlight China’s key role in supply chains for medical and food products. John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, said that creating new supply chains in the United States could take five to eight years. “We’re concerned that officials need to get the right fact sets before they start looking at alternatives,” Murphy added.

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