Trump Administration ‘Turbo-charging’ Efforts to Force Firms From China

Date: Tuesday, May 5, 2020
Source: Sourcing Journal

As the Trump administration gears up for what promises to be a contentious, if unorthodox, election season, the president is seeking to put his foreign policy chops on full display.

The protracted trade war with China has spelled pain for many American businesses—especially in the wake of a pandemic that has curbed consumer appetites and rattled supply chains.

But the president sees his showdown with Xi Jinping as a show of strength, and is likely betting on a “tough on China” platform to play a key role in his potential reelection.

That attitude was underscored over the weekend, when Reuters reported that the president is doubling down on efforts to reduce dependency on China’s overwhelmingly dominant manufacturing prowess.

Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the U.S. State department, told the news outlet that the administration has been working to cut the cord with China in recent years, but is now “turbo-charging that initiative.”

Several government agencies including the U.S. Commerce Department are devising tactics to nudge companies to seek alternative sourcing and manufacturing opportunities. Tax incentives and re-shoring subsidies are among the measures being discussed, officials told Reuters.

Trump has also threatened multiple times to add to the 25 percent tax on $370 billion in Chinese goods that is already in place. The president has also reportedly spoken about sanctioning officials, and companies, who present problems, as well as developing a healthier working relationship with self-governed Taiwan.

Perhaps most notably, government agencies are looking to develop a web of esteemed trade partners. The Economic Prosperity Network would include companies and non-governmental organizations, and would work to set standards on energy, infrastructure, trade, research and commerce, among other areas of interest.

In a press conference on April 29, Secretary of State Mike Pompeo said U.S. agencies are currently working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “move the global economy forward.”

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

Nearshoring opportunities in Latin America could also play a role in moving operations away from China—and could prove a viable option for U.S. companies looking to cut lead times—and duty payments.

“This moment is a perfect storm; the pandemic has crystallized all the worries that people have had about doing business with China,” a senior U.S. official told Reuters, adding that the money companies made in previous deals with the country has been “eclipsed many fold by the economic damage” of the past two months.

 

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