US is preparing a series of measures to move supply chains out of China
US lawmakers and officials are preparing proposals to nudge US companies to withdraw trade and supply from China. These measures include tax breaks, new regulations and carefully structured subsidies..
A Reuters poll of current and former government officials, industry leaders and members of Congress shows there is widespread discussion. Including the idea being discussed «reallocation of funds» $ 25 billion to encourage U.S. companies to fundamentally revamp their relationship with China.
President of the U.S.A Donald Trump long ago promised to return production from abroad. The spread of the coronavirus pandemic and related concerns about the US dependence on reciprocal medical and food supply chains with China are fueling renewed enthusiasm for the idea in the White House.
On Thursday, Trump signed an executive order that gave US investment agencies new powers to help manufacturers in the United States. According to Trump, the goal is to «produce everything America needs – first for itself and then export it all over the world, including medicines».
But the Trump administration itself remains divided over how best to proceed, and this issue is unlikely to be addressed in the next package of tax incentives to offset the effects of the economic downturn. Congress has begun work on a new fiscal stimulus package, but it remains unclear when it will be able to pass.
The situation takes on a particular resonance in an American election year. Anti-Chinese, pro-American job proposals could resonate well with voters. Giving money to the public or tax breaks for companies that have moved their supply chains out of China can play an important role at a time when small businesses are hesitant about their electrical preferences..
Both Republicans and Democrats are drafting legislation to reduce U.S. dependence on Chinese products, which accounted for about 18% of all U.S. imports in 2019..
«Supply chain and supply chain integrity issues … are important», – told reporters on May 7 Mac Thornberry, Chief Republican Representative on the House Armed Services Committee.
The medical supply chain and defense-related goods are top of this list..
«Coronavirus has become a painful wake-up call as we are overly dependent on countries like China for critical health goods», – said the senator Lindsay Graham On Friday. He is expected to present a new bill this week.
Republican Senator Josh Hawley insists on local regulation for healthcare supply chains and "generous investment grants", to stimulate an increase in the domestic production of a number of goods and components. Republican Senator Marco Rubio May 10 introduced a bill that would ban the sale of certain goods to China and would raise taxes on the income of American companies from shipments from China.
Bipartisan Bill presented by a representative of the Democratic Party Anna Eshu and the representative of the Republicans Susan Brooks, instruct the commission to recommend ways to reduce dependence on drug supplies to China.
Republican spokesman Mark Greene proposes to develop financing for takeovers of troubled American companies that are critical to US national security.
Presidential administration officials say Washington is discussing the idea of allocating $ 25 billion to companies that produce essential goods. Manufacturing must return to the United States, guarantees that products throughout the supply chain will be manufactured domestically.
No legislator has publicly endorsed this draft, but the topic is part of a broader debate in Congress. One administration official said states could manage funds through their separate economic development organizations..
It would be a boon for states that are struggling to shape their own budgets after widespread quarantines, sharp tax cuts and huge increases in COVID-related spending, one official told Reuters..
Concerns about what the government is setting «industrial policy», which involves subsidizing the industry directly, is controversial even among Trump’s main associates.
Direct subsidies are not a priority, one of two sources in the presidential administration told Reuters. «Internally, some are wondering why we should provide funds to such companies that have left the market in recent years.», – he said.
Economic Advisor to the White House Larry Kudlow spoke publicly about using tax breaks to nudge American companies to relocate production.
White House Trade Advisor Peter Navarro wants the federal government to purchase more US-made medical supplies and drugs. Trump has not yet signed an executive order that promotes Navarro.
Minister of Finance Stephen Mnuchin and others advocate for the creation of reliable networks of suppliers of drugs and medical supplies, said two officials familiar with the matter..
Critics of the idea argue that providing federal funds to companies directly moving trade chains outside China could violate World Trade Organization rules and discourage foreign companies from doing business in the United States..
Meanwhile, the U.S. Department of State is working with agencies and other governments to diversify U.S. supply chains from China.. «This includes returning manufacturing to the United States and expanding our base of international manufacturing partners.», – State Department spokesman said.