The aggressive stance of the trump card government towards China has increased uncertainty in trade relations between the US and China. When considering how the presidential elections may affect the flow of international trade, companies should avoid bias.
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Business leaders should not forget that the trans-Pacific trade war has not reduced exports as much as many feared. As recently reported in the Wall Street Journal, Chinese exports to the United States fell just 3.6 percent in the first eight months of 2020, despite world trade being restricted by coronavirus barriers.
Most of these activities were prompted by the increase in exports of goods needed to combat the Covida 19 pandemic. This is despite recent protests that the United States is too dependent on China for vital services such as personal protective equipment. In fact, the global demand for PPE and other virus-related products is helping China to offset the decline in exports of other goods.
The Kovida 19 pandemic and the deterioration of trade relations between the US and China are expected to lead to an exodus of US companies from China.
Officials from the Trump administration joined the truck and claimed the flight from China was imminent. The fact is, as Trade Minister Wilbur Ross said at the end of January when China was taken over by the coronavirus, it gives companies another reason to think when they change their supply chain…. their supply chain. So I think it will help speed up the return of jobs in North America.
The exodus did not take place. Although some companies – particularly in labour-intensive sectors – left China even before the pandemic began, the decision to leave China involves many considerations.
Many companies have good reasons to stay. Why, for example, leave behind one of the richest markets in the world? China is the second largest economy in the world and consumes about 20% of world production. Companies active in sectors such as the technology and automotive industries are not likely to give up their investments in complex and highly integrated subcontracting in China in the foreseeable future.
An investigation by the US Chamber of Commerce in March 2020 showed that more than 70% of companies in China did not plan to relocate their production, supply chains or some of their suppliers to China as a result of the pandemic.
It is tempting to think that President Trump will double his trade war with China in a second term, causing more and more companies to rethink their operations in China in the face of even greater volatility.
On the contrary, it is easy to hope that Joe Biden’s victory paves the way for more stability and perhaps even for a normalization of relations between the two trade giants.
But the anti-Christian sentiment is perhaps the only thing that Democrats and Republicans have in common. China may have more reason to fear the Biden government than the return of its Republican opponent.
China has finally learned to control the Trump administration’s trade policy. However, a more thoughtful approach by President Biden could include a coalition of the United States, the European Union, Japan and other major trading blocs.
Instead of going it alone – the Achilles heel of Trump’s intervention – Mr. Biden could use the combined purchasing power of these allies to put pressure on China to make significant changes in sensitive areas such as the international theft of goods.
Such changes could seriously affect value chains in China.
The key is to expect the unexpected when assessing the performance of trade between the US and China.
-Director of the Centre for Transport and Logistics of the Massachusetts Institute of Technology. His last book is New (Ab) Normal: Restructuring of business and supply chain strategies outside Kovid-19.
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