Policies Shifted Trade from China?

Has trade for materials, components, and product shifted away from China to be used in the U.S.? Maybe, maybe not, and maybe later. If you are going to manufacture in the US, you have to have the capability. It make take a bit to get up and ready.

If we are buying product, etc. from Vietnam and Mexico, I would be planning a trip to each plant to see what the capabilities are. This is standard sourcing procedure. What is the capacity, conditions of the facility, quality, manpower, sources of materials, environment, documentation, etc. The same would hold true in the U.S.

It is easy enough to find out. Look at the Bill of Lading, SDS, CO, etc. Point of manufacture has to be identified also. A Certificate of Origin (CO) must have :

  • Goods are grown, produced or manufactured in a country entitled to the specific tariff treatment
  • Not less than a certain percentage of the production cost was incurred in the country of origin or a country entitled to the same or a more favorable tariff treatment
  • The goods are shipped directly (or by acceptable transhipment) from one qualifying country to the other.

If they are not sure, than go to the plant and see for yourself what is occurring.

Also well-known standards like ISO or ANSI or a more niche accreditation like QS 9000 or IRIS, quality certifications should be in hand.

This is a silly article. I have yet to see the detail of the study to see if they discuss what the supplier have to prove they can supply what the US needs to safely manufacture or provide.

Trump, Biden Policies Shifted Trade from China, Study Shows, voanews.com

U.S. trade has shifted away from China due to policies enacted by the Biden and Trump administrations, but U.S. reliance on China-linked supply chains has not necessarily been reduced and consumers have faced higher costs, according to new research presented Saturday at a Federal Reserve economic symposium.

Despite deglobalization fears after the coronavirus pandemic and Russia’s invasion of Ukraine, overall trade “has held steady at just under 60% of world (gross domestic product) rather than gone into freefall,” Laura Alfaro, an economist at Harvard Business School, and Davin Chor, an associate professor at the Tuck School of Business at Dartmouth, concluded in their paper, which was presented at the annual gathering of central bankers and economists in Jackson Hole, Wyoming.

But U.S. tariffs on Chinese goods, recently enacted industrial policies, and the pandemic, do seem to have touched off a “‘great reallocation’ in supply chain activity: Direct US sourcing from China has decreased,” from 21.6% of U.S. imports as of 2016 to 16.5% last year, Alfaro and Chor wrote.

What’s less certain is what that means, with the authors saying the shift from China is raising prices for consumers without clearly providing offsetting benefits in the form of, for example, improved manufacturing efficiency in the U.S.

It is not even certain that the decline in China’s U.S. import share represents a true delinking, they said.

Vietnam and Mexico, for example, appear to have captured much of the reallocated trade, the authors said, based on an analysis of goods import and export patterns, while an increase in U.S. purchases of less processed goods from abroad was “indicative of some reshoring of production stages.”

And among companies, they said, “concerns are being voiced over the wisdom of sprawling supply chains that can expose firms and countries to the risk of disruptions,” from events like the pandemic or severe weather, or policy shocks like tariffs.

Yet in the background, the researchers noted that China had “stepped up” its trade and investment activity with Vietnam and Mexico, as well as other countries.

“The U.S. could well remain indirectly connected to China through its trade and global value chain links with these third-party countries,” they argued.

Prices for goods from some countries, moreover, were beginning to rise.

“The recent policy restrictions to shift sourcing patterns or even to encourage substitution toward domestic inputs are poised to add to wage and cost pressures in the U.S.,” the research found, a pointed conclusion as the Fed tries to lower inflation by slowing the U.S. economy.