Sep 25, 2018

Why it matters: Global supply lines are entangled in China

Huangpu port in China. Photo: VCG/Getty Images

The Trump administration is not only seeking what it calls fairer trade with Beijing, but much more — to upend the bedrock of the Chinese economy by forcing out the chain of manufacturing supply from the country, and pushing it elsewhere.

Why it matters: There are doubts about this end game of Trump's trade war. After decades of development and tens of millions of dollars of investment, few U.S. companies seem likely to move their manufacturing facilities out of China.

"It can’t be a replay of the Cold War division between the West and the Soviet Union — industries were nationally based back then and innovation wasn’t global.  All this changed after 1990."
— Jim Lewis of the Center for Strategic and International Studies

China has been the world's biggest exporter for almost two decades and has poured millions into its logistics network so global companies can quickly move goods from factories to cargo ships. China also has one of the best-trained manufacturing workforces in the world.

  • U.S. companies can consider moving production from China to Cambodia, Malaysia, Vietnam or elsewhere — both to dodge tariffs and avoid the threat of intellectual property theft, But elsewhere, they face other disadvantages like dirt roads between factories and ports and inexperienced workers, the New York Times reports.
  • And China has levers to make sure it isn't frozen out of global supply chains, Lewis says. For example, it could threaten to take away a foreign company's access to its massive market.

Yes, but: Some companies are at least putting a halt to new Chinese production capacity.

  • Feng Tay Enterprises, a Taiwanese footwear manufacturer that services Nike and Adidas, stopped building up Chinese production over 10 years ago, per Nikkei Asian Review. It's now adding capacity in India and Southeast Asia.
  • Foxconn, the iPhone and laptop maker, earned kudos from Washington for promising to bring a chunk of production to Wisconsin.

What to watch: If a few big names try to cut reliance on China — even if they don't move out entirely — President Xi Jinping could make concessions to avoid disrupting the interconnected supply chain.

  • For now, that's unlikely to happen with Xi. "He’s overestimated China’s ability to make advanced technology without Western help, but it will take a while for him to admit this," Lewis says

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Trump weighs quarantine of New York, New Jersey, Connecticut

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios

President Trump said Saturday he's considering a short-term quarantine of New York, New Jersey and parts of Connecticut, which have already taken steps to help residents isolate. Gov. Andrew Cuomo reacted to Trump's comments by telling CNN, "This would be a federal declaration of war on states" and that it would cause "chaos."

The big picture: With more than 121,000 people infected, the U.S. has the most COVID-19 cases in the world, exceeding China and Italy, per data from Johns Hopkins. A second wave of American cities, including Boston, Detroit, New Orleans and Philadelphia, are reporting influxes of cases.

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Illustration: Sarah Grillo/Axios

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  2. U.S.: Leads the world in cases. Total confirmed cases as of 7:30 p.m. ET: 121,478 — Total deaths: 2,026 — Total recoveries: 1,072.
  3. Federal government latest: President Trump is considering a quarantine on New York, parts of New Jersey and Connecticut.
  4. State updates: Alaska is latest state to issue a stay-at-home order — New York is trying to nearly triple its hospital capacity in less than a month and has moved its presidential primary to June 23. Some Midwestern swing voters that supported Trump's handling of the virus less than two weeks ago are now balking at his call for the U.S. to be "opened up" by Easter.
  5. World updates: In Spain, over 1,400 people were confirmed dead between Thursday to Saturday.
  6. 🚀 Space updates: OneWeb filed for bankruptcy amid the novel coronavirus pandemic.
  7. Hollywood: Tom Hanks and Rita Wilson have returned to U.S. after being treated for coronavirus.
  8. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

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Coronavirus updates: Deaths surge in Italy and Spain

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

The novel coronavirus has since Friday killed 889 more people in Italy and 832 others in Spain, which announced all non-essential workplaces would close for two weeks.

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