American companies moving away from China as main supplier

by Karen Faulkner, Worthy News Correspondent

(Worthy News) – A new report shows the “dramatic reversal” of a five-year trend as US companies commanded a considerably larger share of manufacturing in 2019 than the 14 Asian exporters that were tracked for the study. According to the seventh annual Reshoring Index report by global manufacturing consulting firm Kearney, Chinese exporters suffered the greatest losses.

Forbes confirms that, even before the coronavirus pandemic, tariffs resulting from the recent US-China trade war had caused American companies to reassess their supply chains. Some companies asked their Chinese partners to move to south-east Asia to avoid tariffs, while others simply stopped all sourcing from China: Vietnam and Mexico have been principal beneficiaries of such reorganization. The move away from China as chief supplier is expected to advance even further in the wake of the pandemic.

Co-authoring the Kearney report, Patrick Van den Bossche wrote: “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. 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.”

One systemic shock to US business came when a number of American companies were unable to purchase supplies online in February and March as pertinent Chinese factories were closed due to the coronavirus outbreak. Moreover, Forbes reports, China is a chief supplier to the US of hazmat suits, rubber gloves, surgical masks and ventilators – items that must be freely accessible during a pandemic.

The authors of the Kearney report conclude that, while it is not yet known how far the pandemic will devastate the economy, companies “will be compelled to go much further in rethinking their sourcing strategies, (and) their entire supply chains.” Specifically, the authors believe, companies will no longer want to be solely reliant on China.

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