Trump Admin. ‘Turbocharging’ Withdrawal of Supply Chains from China

The Trump administration is stepping up an effort to reduce dependence on Chinese manufacturing following the Wuhan coronavirus pandemic, including possible new incentives for companies to shift supply chains, such as tax benefits and subsidies.

“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 U.S. State Department, told Reuters, adding that the focus was on “the critical areas” and “bottlenecks.”

Measures involving the Commerce Department, State, and other federal agencies are being explored to determine which supply chains are “essential” and how they could be decoupled from China. Sources said that one such proposal involves the creation of a trade network of “trusted partners” called the “Economic Prosperity Network” that would not include China.

Secretary of State Mike Pompeo said last week that the U.S. was working with Australia, India, Japan, New Zealand, South Korea, and Vietnam to “move the global economy forward,” including how to “restructure … supply chains to prevent something like this from ever happening again.”

The Department of Homeland Security found in a new report that China “intentionally concealed the severity” of the initial coronavirus outbreak in order to stock up on medical supplies.

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

An April survey conducted by the American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai found that one in five firms said coronavirus would accelerate decoupling from China, while over half — 52 percent — said it was too early to tell what would happen to their long-term supply chain strategy.

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