US In Push To Cut Reliance On Chinese Supply Chains

The Trump administration is "turbocharging" an initiative to remove global industrial supply chains from China as it weighs new tariffs to punish Beijing for its handling of the coronavirus outbreak, according to officials familiar with US planning.

"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 Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the US State Department.

The US Commerce Department, State and other agencies are looking for ways to push companies to move both sourcing and manufacturing out of China.

Tax incentives and potential re-shoring subsidies are among measures being considered to spur changes, the current and former officials said.

“There is a whole of government push on this,” said one. Agencies are probing which manufacturing should be deemed "essential" and how to produce these goods outside of China.

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

"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 coronavirus, the official said.

The United States is pushing to create an alliance of "trusted partners" dubbed the "Economic Prosperity Network", one official said.

It would include companies and civil society groups operating under the same set of standards on everything from digital business, energy and infrastructure to research, trade, education and commerce, he said.

The US government is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to "move the global economy forward”, Secretary of State Mike Pompeo said on April 29.

These discussions include “how we restructure ... supply chains to prevent something like this from ever happening again”, Pompeo said.

Many US companies have invested heavily in Chinese manufacturing and rely on China's 1.4 billion people for a big chunk of their sales.

"Diversification and some redundancy in supply chains will make sense given the level of risk that the pandemic has uncovered," said Doug Barry, spokesman for the US-China Business Council. "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 facilities in the United States could take five to eight years, he said. (Reuters)