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Trump has plan to remove US dependency on China supply chain

Last updated on May 4, 2020

Reading Time: 3 minutes

By Mark Moore

The Trump administration is “turbocharging” an initiative to remove the US from dependency on a China-based supply chain and weighing imposing new tariffs to punish the Communist Party in Beijing for its response to the coronavirus pandemic, according to a report on Monday.

The economic damage and death toll from the COVID-19 outbreak has prompted a government-wide plan to shift the supply chain from China — an extension of President Trump’s pledge to return manufacturing jobs to the US.

“We’ve been working on [reducing the reliance of our supply chains in China] over the last few years but we are now turbocharging that initiative,” Keith Krach, undersecretary for economic growth, energy and the environment at the State Department, told Reuters.

“I think it is essential to understand where the critical areas are and where critical bottlenecks exist,” Krach said, adding that the government could announce new action soon.

A number of agencies, including the Commerce and State departments, are looking at how to move the supply chain and manufacturing from China using tax incentives and other measures, the report said.

They are examining which manufacturing work should be considered “essential” and how to make those goods outside of China.

“There is a whole-of-government push on this,” an official told Reuters. “The White House’s policy on China has always been caught between pro-trade advisers and China hawks, but the current situation has given the hard-liners new ammunition.”

“This moment is a perfect storm; the pandemic has crystallized all the worries that people have had about doing business with China,” a senior US official said.

“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” from the pandemic, the official said.

The president has talked about adding new tariffs on top of the 25 percent levies on $370 billion in Chinese goods already in place.

The administration is also considering slapping sanctions on Chinese officials or companies and developing closer relations with Taiwan, which China considers a rogue province.

Secretary of State Mike Pompeo said late last month that the administration is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “move the global economy forward.”

He said the talks include how to restructure supply chains “to prevent something like this from ever happening again.”

The pandemic, which has infected more than 3.5 million worldwide, has shined new light on Communist China’s critical role in the supply chain for generic drugs in the US, as well as medical equipment and food supplies.

But many US companies have invested heavily in China and rely on the country’s 1.4 billion people for sales.

“Diversification and some redundancy in supply chains will make sense given the level of risk that the pandemic has uncovered,” Doug Barry, spokesman for the U.S.-China Business Council, told Reuters. “But we don’t see a wholesale rush for the exits by companies doing business in China.”

John Murphy, senior vice president for international policy at the US Chamber of Commerce, said building new manufacturing facilities in the US could take up to eight years.

“We’re concerned that officials need to get the right fact sets before they start looking at alternatives,” he said.

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