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An initiative to rip global supply chains from China has been pushed by the Trump administration.
This move is in retaliation for the way China reportedly handled the coronavirus outbreak. Officials familiar with U.S. planning say that new tariffs are being considered.
Trump has long pledged to bring back manufacturing from overseas, and he’s stepping up his attacks against China ahead of the U.S. presidential election on November 3.
The enormous U.S. coronavirus death toll and economic destruction are both driving the push to move the supply chain away from China. However, this could mean the chain could move to other nations instead.
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Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the U.S. State Department, told Reuters that this move has been in the works for some time.
“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,” said Krach. “I think it’s essential to understand where the critical areas are and where critical bottlenecks exist.”
As a result, Krach said the government could announce new actions on the matter soon.
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Several agencies, including the U.S. Commerce Department, are looking for ways to move sourcing and manufacturing out of China. How would they do this? They’re considering re-shorting subsidies and even tax incentives.
“There is a whole of government push on this,” said the current and former officials to Reuters. Reportedly, the agencies are probing how to produce “essential” goods outside of China.
Likewise, another senior official advised, “This moment is a perfect storm. The pandemic has crystallized all the worries that people have had about doing business with China. 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.”
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Trump has repeatedly said that he could place new tariffs on Chinese goods. For instance, these would be placed on top of the up-to 25% tax on $350 billion in Chinese goods that are currently in place.
However, other means to punish China are also being considered. These may include sanctions on companies or officials or a closer relationship with Taiwan, consequently.
U.S. companies are stressing over the idea of paying the tariffs. This is especially true as sales plummet as a result of coronavirus lockdowns. U.S. companies that heavily invest in Chinese manufacturing also worry.
Doug Barry, a spokesman for the U.S.-China Business Council echoed those concerns and offered finance advice.
“Diversification and some redundancy in supply chains will make sense give the level of risk that the pandemic has uncovered,” he said. “But we don’t see a wholesale rush for the exits by companies doing business with China.”
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