By Tank Murdoch
(TNS) During his 2016 campaign, Donald Trump repeatedly promised to ‘fix’ the massive trade imbalances the United States has had with China for decades, and by all measures, he’s delivering.
And the recent outbreak of Wuhan coronavirus in China is actually accentuating Trump’s U.S.-China trade policies.
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Thanks to the virus’ spread and continued factory production slowdowns in China, U.S. supply chains for all kinds of things ranging from consumer goods to medical supplies needed to combat the virus at home are in short supply. The reason is simple: When your own economy is so massively intertwined with the economy of just one other nation, it only stands to reason that your country will suffer when that other country has a major problem producing the goods you need.
As such, U.S. companies are accelerating their plans to move operations out of China to neighboring Asian countries like Vietnam, Taiwan, and Thailand.
But this supply chain and production shift began long before coronavirus hit. It actually began as a result of the tariff regime put in place by President Trump to force China into better trade terms with the United States.
As we reported in June:
Virtually no one inside Washingtonâ€™s political, academic, and media establishment believes in President Donald Trumpâ€™s approach to trade with China â€” specifically his imposition of tariffs on hundreds of billions of dollarsâ€™ worth of goods in order to secure a better trade arrangement for the United States.
But by several measures, the presidentâ€™s tariff regime is working, as evidenced by the latest indicator: Apple says it will shift some 30 percent of its productionÂ outÂ of China not only due to the tariffs but also because of uncertainty over the future of trade between both countries,Â accordingÂ to Nikkei.
And this comes after a Foxconn exec warned that the biggest maker of iPhones in China was ready to shift production elsewhere.
The Epoch Times provided additional details on Sunday. The media outlet noted that the effort to shift American supply chains out of China had begun in earnest months ago, and are now coming to fruition:
The manufacturingÂ supply chainÂ shifts out of China, which commenced during the U.S.-China trade war, is gaining critical mass amid theÂ coronavirusÂ crisis.
Later this year, U.S. consumers will begin to see Microsoft Surface laptops and Google Pixel smartphones labeled â€œMade in Vietnam.â€ …
Microsoft will start production of its PC hardware, such as Surface laptops and tablets, in Vietnam as soon as the second quarter, sources with knowledge of the matter told Nikkei Asian Review. â€œThe volume in Vietnam would be small at the beginning, but the output will pick up and this is the direction that Microsoft wants,â€ sources told Nikkei.
Alphabet Inc. is also set to manufacture the Google Pixel 4A and Pixel 5 smartphones with partners in Vietnam â€œas soon as April.â€ The company is shifting production of smart home devices such as the Google Nest Mini from China to Thailand.
Apple is also shifting some production capabilities out of China. Assembly or a portion of its new iPad Pros, AirPods, and Apple Watch will shift from China to Taiwan, according to Taiwan News. Apple is widely expected to launch a new iteration of the iPad Pro in March, and the supply constraints from lowered China production and a partial shift to Taiwan will lower the initial supply of the popular tablet.
We noted Saturday that much of our own stock market demise this past week was in large part tied to Chinese supply chain reductions caused by a lack of industrial output due to the coronavirus. Trump’s tariffs not only have forced the Chinese to the negotiating table, but they have also had the dual effect of making it less cost effective for American corporations to keep their production in China — where Beijing often insists on ‘additional’ benefits such as technology transfers, and where American executives are continually monitored by the Communist regime.
“Previously, the hardware manufacturing capacity of all three tech companies rested almost entirely within China, underscoring the huge dependency of U.S. companies on Chinese manufacturing,” The Epoch Times reported.
“But the January coronavirus outbreak became the latest catalyst in an accelerating shift of production out of China, a trend which began two years ago during the U.S.-China trade war.”
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Terry Ludgren, CEO of department store giant Macyâ€™s from 2003-2017, told CNBC on Feb. 26: â€œSomething like 90 percent of all footwear under $100 at retail are coming out of China. And we all need to diversify that strategy.”
One other benefit to this massive supply chain shift: Should China become our enemy on some distant battlefield in the future, Trump’s trade policies today will seem even more like genius.
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