Disruption Report #28: Another Port Closure, Reshoring and U.S. Business Calls for Cuts in Chinese Tariffs

And Another Chinese Port Closes

All inbound and outbound container services at Meishan terminal in Ningbo-Zhoushan port were halted Wednesday until further notice due to a “system disruption,”

China Partly Shuts World’s Third-Busiest Port, Risking Trade,” Bloomberg

Last month it was the port of Yantian. This time it’s Ningbo. The chaos in the world’s supply chain continues as the Chinese government closed down parts of the port of Ningbo due to coronavirus.

Bloomberg quotes Joshm Brazil, Vice President of Marketing at project 44, a supply-chain intelligence company, as stating:

“There may be far-reaching downstream consequences going into Black Friday and holiday shopping seasons” and the next 24 hours will determine whether there is a large outbreak or not.”

Concerns about Black Friday sends an ominous message. This is a problem we will keep our eye on.

Companies Contemplate Bringing Manufacturing Home

52% of the U.S. manufacturing executives surveyed by the consulting firm Kearney said they have started buying more supplies in the United States in response to COVID-related supply disruptions. Forty-seven percent said they plan to reduce reliance on supplies or factories from a single country; 41% specifically said they wanted to cut their dependence on China.

Shipping snags prompt US firms to mull retreat from China,”PaUL weisman, AP

Reshoring is the act of bringing manufacturing home from foreign countries. According to a Kearney survey, that’s starting to look like an option for companies looking to get more control over their supply chain.

Companies may wish to re-shore or move to Mexico, but first the factories have to built so that the U.S. and Mexico have the capacity to take on the task. That is no small task as it will take money, patience, a willingness to pay more and a whole lot of time.

For now, I believe that you will see a small amount of movement back to home countries, but most toy manufacturing is labor-intensive, and that calls for low-cost labor. China has the low cost labor plus the capacity and the workforce.

Never-the-less, if things don’t get back to normal in the next year we may be on the cusp of structural changes in how and where toys are made. A change that has not taken place in decades.

American Business Wants to the U.S. Government to Cut Chinese Tariffs

Nearly three dozen of the nation’s most influential business groups—representing retailers, chip makers, farmers and others—are calling on the Biden administration to restart negotiations with China and cut tariffs on imports, saying they are a drag on the U.S. economy.

Business Groups Call on Biden to Restart Trade Talks With China,” Wall Street Journal

The U.S. Chamber of Commerce, the Business Round Table, the National Retail Federation, the American Farm Bureau Federation, and the Semiconductor Industry Association, a fairly diverse group, are pushing to reduce tariffs on Chinese goods.

The Biden Administration is currently studying the Chinese – American economic relationship. That has stopped what was ongoing negotiations as the government wants to determine its policy before continuing its engagement.

That’s entirely understandable, but in a world of chaos, it would be nice to see some efforts, from both sides, designed to calm things down rather than rev them up.

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