COVID-19 made China a riskier place to manufacture

As we push through the coronavirus/covid-19 crisis, it’s hard not to wonder how we’ll change in its wake. We will, without a doubt, see economic and political changes that seemed unimaginable just 6 months ago.

 

One obvious area is trade. Coronavirus first manifested in China, forcing the closure of manufacturing and supply chains for weeks. Although factories are open again, nearly every supply chain manager is now keenly aware of the risk of concentrating supply chains in a single location.

 

According to this article, “China produces about 80% of the world’s air-conditioners, 70% of its mobile phones and 60% of its shoes.” As many Americans learned in recent weeks, 80% of antibiotics used in the US are made in China, as is 95% of ibuprofen, 91% of hydrocortisone, and 70% of acetaminophen. It’s likely that globalization – centered on China – gives way to trade regionalization as one way to reduce risk.

 

While this note is not an endorsement of Mexico, it’s hard – from a US perspective – not to see Mexico as a legitimate sourcing alternative to China. Part of the USMCA free trade agreement, Mexico allows for a diversity of transport methods to the US (trucking, rail, air and sea) with faster transit times, lower relative transport cost to China, convenient time zone, etc.

 

So, let’s first look at what China exports to the US:

 

2020 Forecast China Exports to US

www.completeintel.com/2020/03/24/covid-19-made-china-a-riskier-place-to-manufacture/