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President Donald Trump promised to bring American manufacturers back home and the COVID-19 pandemic may just be helping him do that.
A new report shows that the coronavirus outbreak may be helping the president with one of his campaign promises as American manufacturing companies are reportedly exiting China in large numbers due to the nation’s inability to contain the virus initially.
While trade wars between the U.S. and China had already been spurring the exodus of the companies, the coronavirus outbreak added a new dimension and a “dramatic reversal” of a five-year trend in 2019, according to a report published by the manufacturing consulting firm, Kearney.
“The full extent of the societal and economic trauma the coronavirus pandemic may cause is still unknown. But it will be historic,” the report read.
“From 2018 to 2019 US manufacturing imports from China declined by 17 percent, a total drop of roughly $90 billion,” the report continued, noting that US production in “2019 commanded a significantly greater share versus the 14 Asian low-cost countries,” with China being the hardest hit.
“Three decades ago, U.S. producers began manufacturing and sourcing in China for one reason: costs. The trade war brought a second dimension more fully into the equation―risk―as tariffs and the threat of disrupted China imports prompted companies to weigh surety of supply more fully alongside costs,” the report went on.
“COVID-19 brings a third dimension more fully into the mix, and arguably to the fore: resilience―the ability to foresee and adapt to unforeseen systemic shocks,” co-authors and Kearney partners, Patrick Van den Bossche, Brooks Levering, Yuri Castaño and Brandon Blaesser, wrote.
And the U.S. companies are not alone, as Japan recently made a move to pay its companies to relocate, leaving China to return home or set up in other countries.
— Conservative News (@BIZPACReview) April 9, 2020
Arkansas Sen. Tom Cotton noted in a tweet reacting to the report that there will be more of the exodus “as the world turns against China.”
The Kearney report did note that some U.S. companies are moving their manufacturing sites to other countries such as Mexico and southeast Asian countries.
“The lessons we must learn from COVID-19 are as momentous as they are harsh. While the trade war triggered some notable tinkering, the massive operational disruption wrought by the coronavirus pandemic will compel companies to fundamentally rethink their sourcing strategies,” the report said.
“At minimum, we expect they will be increasingly inclined to spread their risks rather than put all their eggs in the lowest cost basket, as many long did in China,” it added.
And as Democrats and Trump critics continue to accuse the president of being racist for his quick decision to ban travel with China as well as referring to the virus as the Chinese Wuhan virus, many are coming to an agreement that the Chinese government must bear the responsibility for the coronavirus spread.
“The current crisis is exposing vulnerabilities that cannot be addressed with short-term fixes and minor tinkering,” the Kearney report read. “Companies need to place more value on resilience by building supply chains that can nimbly sense and pivot in response to unexpected demands and disruptions. This is the key to operating profitably in the face of ongoing disruptions.”
“One of the things that this crisis has taught us is that we are dangerously over-dependent on a global supply chain for our medicines, like penicillin; our medical supplies, like masks; and our medical equipment, like ventilators,” White House Trade Adviser Peter Navarro said last week.
The Trump administration was even considering taking legal action against China after it was learned that the Chinese Communist Party allegedly blocked the export of personal protective equipment (PPE) by American manufacturers, The New York Post reported.
There are some companies that are reportedly reinvesting into China, however, including Walmart and Starbucks.
Some U.S. companies are still plowing fresh investment dollars into China. Walmart said Wednesday it would invest $425M in Wuhan over five years, while Starbucks said earlier it’s investing $125M to build a roasting plant.@Kubota_Yoko https://t.co/crNbuaTKxL
— Jonathan Cheng (@JChengWSJ) April 9, 2020
But the COVID-19 pandemic has led some U.S. lawmakers, such as Sen. Marsha Blackburn, to press for an end to American dependence on China.
The Tennessee Republican recently introduced legislation to end America’s dependence on Chinese pharmaceutical manufacturing while increasing that production in the U.S.
“It is the SAM-C Bill, Securing America’s Medicine Cabinet,” Blackburn told Fox News last month. “Many of the pharmaceuticals that are necessary for creating some of these viruses — and certainly the coronavirus family is one of those — they’re made only in China.”
“We are dependent upon them for these. They’re called APIs: active pharmaceutical ingredients,” she added. “My legislation would incentivize bringing that production back on U.S. shores.”
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