KUALA LUMPUR (Feb 1): Ending tariffs for products imported from China, creating incentives for US firms to diversify their supply base and addressing some of the supply chain security issues are the steps the US can take to shore up supply chains.

In a commentary published on Barron’s on Monday (Jan 31), UCLA Anderson School of Management  distinguished professor Christopher S. Tang, chair in business administration Edward W. Carter and managing director of Inline Translation Services in Glendale, California Richard S. Paegelow, said President Joe Biden should first repair the frayed trade relationship with China by announcing a clear agenda.

“Then the US must diversify its supply base that goes beyond China for developing resilient supply chains.

“Moreover, the Biden administration must ensure supply chain security in the US to reduce supply chain disruptions,” they said.

The authors commented that Biden must end the tariffs for products imported from China that are jacking up consumer prices in the US.

“He should negotiate a new trade deal with China based on measurable milestones and enforceable agreements,” he said.

They said the trade war launched by former president Donald Trump’s administration against China in 2018 has proven futile at best and backfired at worst.

They said the reality is that the US will continue to rely on products imported from China in the foreseeable future.

“Case in point: despite higher import tariffs, the US trade deficit with China rose 25% in 2021 over a year earlier to US$396.6 billion.

“To offset the increased tariffs on products imported from China, US companies have raised their prices, hurting American consumers,” they said.

The academics posted that Biden must create incentives for US firms to diversify their supply base beyond China.

Expanding the multi-lateral free trade agreements with various countries can generate the momentum.

They further argued that despite Trump’s hasty withdrawal from the original Trans-Pacific Partnership in 2017 and US Secretary of Commerce Gina Raimondo’s rejection of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in late 2021, the US should reconsider joining CPTPP.

With the US as a member, the CPTPP could also counterbalance the Regional Comprehensive Economic Partnership that China has joined in November 2019.

For instance, if the US can take up the leadership role; it can exert economic and political influence over its member countries.

They added that ultimately, multilateral trade can enable the US to develop a more diverse supply base with less trade friction, which is essential for developing resilient and cost-efficient global supply chains.

After ransomware attacks targeting food supply chains in the US in 2021, the US must improve supply chain cybersecurity.

Tang, Carter and Paegelow said the physical supply chain operations in the US are not secure due to a wave of supply chain robberies that has been brought to light recently.

“For several months, thieves have been raiding Union Pacific cargo containers on rails connected between the busiest ports of Los Angeles and Long Beach and other inland ports,” they said.