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US doesn’t need a coronavirus-driven cultural revolution in manufacturing, whatever Trump’s adviser says
- For listed American companies, which are obliged to maximise shareholder value, manufacturing in China makes good business sense
- Instead of reshoring all US manufacturing, products crucial to public health and national security should be identified and incentives provided to move these production lines back home or to US allies
3-MIN READ3-MIN
Peter Navarro may finally see his dream come true – at least partly. US President Donald Trump’s top trade adviser has spent years railing against American multinationals that rely on Chinese manufacturers.
There’s a reason he has been unsuccessful so far. American chief financial officers are obliged to maximise returns for shareholders. That means they must establish the most cost-effective supply chains available to them. Ideologues can characterise this as a poor moral choice all they want but, for many US companies, sourcing goods from China has been a fiduciary duty.
Even as it became clear that the Chinese government under President Xi Jinping would never reform the way that Washington’s foreign policy elite had hoped – the now-disproved assumption that a more prosperous Chinese middle class would win political rights – most US companies dependent on Chinese manufacturing could only shrug.
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The clearer understanding of China’s increasingly autocratic ways did not remove a corporation’s obligation to shareholders. Moreover, the clout of the US Chamber of Commerce, activist investors and, ultimately, the American consumer’s demand for low-cost goods muted the call to reshore production.
Yes, some companies found marginal capacity in Vietnam, Mexico and other jurisdictions, but China remained the mainstay for the vast majority of materials and components of the products that Americans buy.
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