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When Donald Trump upsets free market liberals with new tariffs, the US president's critics tend to blame the only one. The "Trump Trade War," according to stenography, is either a "negotiating stance" (the optimistic view, more and more deficient with the introduction of broader tariffs on China), or the latest manifestation of what many consider a personality disorder. .
The truth is both more complicated and less flattering to Mr. Trump's self – there is a much larger group of people in the public and private sector who would like to reverse China's economic integration and the United States for strategic reasons
This was evident at a two-day event sponsored late last month by the University of National Defense, which brings together military leaders and civilians to discuss the great challenges of the day. Dozens of experts, government officials and business leaders gathered to talk about the decline of the world order after the Second World War, the rise of China and how the United States could strengthen its manufacturing and defense industries. The goal would be to create resilient supply chains that could withstand not only a trade war but a real war.
In the midst of the broad and varied discussion, stakeholders shared the general feeling that the laissez-faire approach to globalization was over. "If you accept as a starting point that we are in a great power struggle [with China and Russia] then you have to think about securing the basis for innovation, making the industrial base viable." Said Major General John Jansen , the organizer of the event
Freedom & # 39; s Forge which describes the role that American companies – especially automakers – have played in the gear. the United States for the war in the early 1940s. At the time, because of the depth and breadth of manufacturing and logistics of the automotive industry, the sector was considered as important for national security as steel and aluminum.
tariffs or the trade war – or that Detroit will be asked to hand over its unused capacities to the Pentagon anytime soon. But there is a growing group of thoughtful people who believe that the US national security interests will require a forced dismantling of investment links and supply chain between the United States and China. They point to high-tech fields such as artificial intelligence, robotics, autonomous vehicles, virtual reality, financial technology and biotechnology as important not only for the military but also for the growth of private sector
. US government entity that funds private sector technology of interest to the military, released a report on the Chinese technology investment at home and in Silicon Valley. He concluded that Chinese companies now own key technologies and parts of supply chains that affect US military equipment and services, which for years have been increasingly outsourced to the private sector. Chinese companies participated in 16 percent of all US venture capital operations in 2015.
The US Department of Defense also released a separate report to the White House that deepens the problem of supply chain. We are likely to hear more alarming stories like the 2013 revelation that the United States was counting on a factory in China to manufacture a key chemical propellant for the Hellfire missile. After the advertisement, the DoD has found a US factory to manufacture the ingredient.
While the US military is still trying to ensure that its supply chains are not controlled by strategic opponents, the Chinese have played a much more sophisticated game. The difference can be summed up in two words: industrial policy. China has one. The United States does not do it. The United States has always turned its back on an official policy because critics see the government "picking winners". But the Chinese do not choose so much the winners as to use a coordinated approach to exploit the technologies they need. They do this not only through investments and acquisitions, but also through forced joint ventures, industrial espionage and cyber-trafficking.
No one claims that multinationals should adopt this approach. But it's hard to imagine them continuing to do business as usual in this environment. Long before Mr. Trump's election, the financial and reputational risks of globalization became evident
Walmart's decision to outsource garment production to third-tier suppliers in Bangladesh ended when the collapse of Rana Plaza killed 1,100 workers. Boeing outsourced 70% of its Dreamliner to save money, but the project was overshot and behind schedule. It is no wonder that many multinationals have shortened their supply chains even before the current trade conflicts.
This is a trend that will probably accelerate. Multinationals, far more than those focused on the domestic market, will suffer collateral damage from tariffs. They will also be a major target of the Chinese backlash. For the anecdote, this is already leading some groups to relocate their production from China to other countries, such as Vietnam. If the military-industrial complex in the United States makes its way, these supply chains could get even closer to home.
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