COVID-19

Prospect of U.S.-China “decoupling” grows amid shortages of medical goods

Scott Tong Apr 17, 2020
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Johannes Eisele/AFP via Getty Images
COVID-19

Prospect of U.S.-China “decoupling” grows amid shortages of medical goods

Scott Tong Apr 17, 2020
Johannes Eisele/AFP via Getty Images
HTML EMBED:
COPY

Half a year ago, the notion of the United States and China splitting into separate economic spheres struck U.S. multinational executives based in China as highly unlikely.

Today, that’s changed. A new survey of executives at American corporations with long histories in the China market finds 44% responding that U.S.-China economic “decoupling” is “impossible.” That’s down from 66% last fall, suggesting “great potential” for such decoupling, according to the survey from AmCham China, AmCham Shanghai and PwC China.

The survey comes amid increasing calls to bring the manufacturing of essential medical goods — safety gear, pharmaceuticals, devices such as ventilators — back to the U.S. Many items in short supply — masks, safety gowns, raw materials for pharmaceuticals such as penicillin and ibuprofen — come primarily from the same country: China. These concerns were stirred, in part, as some Chinese factories shut down because of the virus. In other instances, the plants sold goods to other countries or to citizens at home.

“One of the learnings from the public’s point of view is that in many ways all roads go back to China,” said Benjamin Shobert, senior associate for international health at the National Bureau of Asian Research. “Given the political realities, the public health realities, now we’re asking ourselves this question of how much of this manufacturing infrastructure are we comfortable having be dependent on China?”

It’s a familiar question. American officials have expressed anxiety about global supply-chain vulnerability in other sectors: semiconductors, 5G telecommunications gear and critical minerals for weapons and advanced batteries. The U.S. government has blocked Chinese acquisitions in key industries, including oil, semiconductors and social media.

On the Chinese side, Beijing’s Made in China 2025 plan is explicitly designed to reduce the nation’s dependence on foreign technology. In addition, the Chinese government has curtailed private sector financial investments in the United States.

“China’s government, nervous about capital outflows as a sign of financial risk and instability, [closed] their own door on their own companies going abroad,” said Daniel Rosen, founding partner of the Rhodium Group consultancy.

Given the pandemic, Rosen expects more calls to bring manufacturing home to the U.S. But that could be expensive because of its higher labor costs. And in some sectors, there may be a shortage of skilled labor. So Rosen suggests less drastic steps.

“Smarter stockpiling, diversification of global supply chain activity so they are not all concentrated in one country are additional strategies that need to be thought through,” he said. “Not just reshoring.”

One risk: raising drawbridges in the global economy could backfire. Since March, more than 30 medical export bans have been imposed around the world. Historically, these types of trade barriers invited tit-for-tat retaliation. And it could happen again — with protective masks, for instance.

“With masks, you’ve probably heard, 3M is doing its best to ramp up production as fast as possible,” said Douglas Irwin, economic historian at Dartmouth College. “But it’s also dependent on imports from Canada of the fibers that go into the masks.”

So if the United States says no masks for Canada, the Canadians could respond and say no fibers for you. And everyone loses.

“So that just begins to cascade and make things more problematic going forward,” Irwin said.

COVID-19 Economy FAQs

New COVID-19 cases and deaths in the U.S. are on the rise. How are Americans reacting?

Johns Hopkins University reports the seven-day average of new cases hit 68,767 on Sunday  — a record — eclipsing the previous record hit in late July during the second, summer wave of infection. A funny thing is happening with consumers though: Even as COVID-19 cases rise, Americans don’t appear to be shying away from stepping indoors to shop or eat or exercise. Morning Consult asked consumers how comfortable they feel going out to eat, to the shopping mall or on a vacation. And their willingness has been rising. Surveys find consumers’ attitudes vary by age and income, and by political affiliation, said Chris Jackson, who heads up polling at Ipsos.

How many people are flying? Has traveled picked up?

Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.

How are Americans feeling about their finances?

Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

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