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Trump Wins Trade War as the Supply Chain Moves Closer to Home

Last Updated September 23, 2020 2:19 PM
Andrew Packer
Last Updated September 23, 2020 2:19 PM
  • After decades of acquiescing to the Chinese Communist Party, manufacturers are diversifying their needs elsewhere.
  • This is a massive win for Donald Trump and a vindication of his entire presidency.
  • Even better, it’s a win for both global consumers and human rights.

It wasn’t decades of intellectual property theft . It wasn’t the wholesale surrender of corporate trademarks to local companies  owned by the People’s Republic of China. It wasn’t even a global pandemic .

No, it as the tenacity of President Trump to win the trade war  that’s now bringing manufacturing home.

Supply Chain Bulls Leave the China Shop

The latest blow comes as Hon Hai Precision Industry Co., better known as Foxconn, says it’s working to produce more of its goods outside of China. It’s already pushed the numbers up from 25% to 30% in the last year.

The company is a major supplier to Apple  (NASDAQ:AAPL), and the goal is to avoid any future tariff hits between the United States and the People’s Republic of China.

As Foxconn Chairman Young Liu stated :

No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each… [China’s] days as the world’s factory are done.

These changes could radically transform the percentage of world trade that goes through China.

Imports from China
Over the years, imports from China around the world have increased to alarming levels. Now, the trend is about to reverse as manufacturers shift to different countries. | Source: Bloomberg 

While most manufacturing companies are looking to leave China for other countries in Asia, smaller businesses are shifting production to Mexico . That would save transportation costs across the Pacific Ocean. Further, a full 61% of companies acquiring goods from China are looking for a domestic partner to avoid the international market entirely.

According to OFX North American President Alfred Nader:

Mexico has a nice supply chain in auto and they are decent sized players in textiles and in other industries that require light manufacturing. Most people don’t really think of this, but Mexico is cheap and on a labor perspective it is as cheap or cheaper than China.

With plenty of global options as good as China, if not better, based on price alone, there are some other factors that make now the time to ditch the People’s Republic.

The Not-So-Silky Road Ahead

Many have seen the rise of China as a potential superpower capable of usurping the United States.

But the fact of the matter is, the country’s internal problems will simply be exacerbated without the massive job growth from being a magnet of global manufacturing, including the intellectual property theft that’s come with that. The rest of the world will fare just fine.

China IP Theft
China has been stealing billions of dollars in intellectual property. That’ll be much more difficult as business shifts to other nations. | Source: CNBC 

Much in the same way Japan appeared poised to overtake the United States in the 1980s , it’s not going to happen with China.

China’s one-child policy has created a demographic bulge in military-age men that’s being worked through right now. That won’t last much longer. 

With slowing job growth, expect more internal strife to rock the nation instead. Given China’s internal problems and the human rights abuses  that have managed to make it to international news outlets, things are already far worse than they appear.

President Trump’s trade war may end up improving the rights of millions as a result, much like how President George W. Bush’s AIDS initiative in Africa  helped improve millions of lives there. It’s amazing what a few little changes in a global supply chain can bring.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.