America-China Summit Signals Continued Supply Chain Tensions
In a March 2021 summit meant to reset Sino-American relations after four years of animosity and conflict, it quickly became evident that things aren’t going back to the way they were. The summit, which took place in Alaska, started off with a confrontation and didn’t improve as the meeting continued. The chief takeaway was a simple one: China isn’t giving ground on any of its trade or cultural policies, and the country expects the United States to recognize it on equal footing. Under the surface, it means even more hard times ahead for supply chains already in chaos.
A contentious meeting of delegates
The summit was a meeting designed to reset the relationship between the United States and China, in the wake of public contention created by the prior administration. Unfortunately, there was no reset — only more animosity. After the U.S. delegates tried to lead the conversation from a position of power, Chinese delegates batted back to criticize the United States’ own shortcomings in recent months and years. The summit quick devolved, with both sides erecting walls instead of building bridges.
Despite the animosity, both countries want the same thing: a return to open, positive trade relations. Unfortunately, both want it on their terms. In a departure from past tendencies, China has come out in an open challenge and demanded the United States recognize it as an equal world power. Reluctance to do so could lead to a seemingly inevitable decoupling — even more so than has occurred over the past four years.
Supply chains will continue to suffer
After the contentious summit, both countries left the table having gotten no further on trade agreements than when they arrived. As a result, global supply chains will continue to lag as the relationship remains one of momentary convenience.
What many don’t realize is that the supply chain woes caused by COVID-19 are all but solved. The persistent issues sourcing materials and receiving inventory from China are by design. According to Supply Chain Advisor Paul Erickson and Eamon McKinney, Ph.D., M.B.A., (sinologist), China’s control over critical supply chains has moved into strategic territory. In an article for IndustryWeek, the authors state:
“For the last year, many Chinese companies have been purposely delaying or declining orders of strategic product from American companies. Where orders are still in the supply chain, American companies are often now at the back of the line. China prioritizes orders to countries they regard as friends and/or allies. Evidently, China does not consider America in this regard.”
While openly exchanging tariffs and jabs for the better part of four years, it appears China has been planning for the future behind closed doors. While the United States continues to rely on materials sourced from China and imports of Chinese goods, China has already begun decoupling itself from the United States. It’s a move that’s likely to continue hampering supply chains.
A new global economy
China’s move to decouple from the United States and its open combativeness at the March summit show that the country means business. China isn’t looking for a “deal”; it’s looking for bilateral relations and equal footing. And it appears China has the negotiating power to make these demands. Its economy, while stunted from tariffs, continues to recover well. Moreover, thanks to supply chain leverage, the country is able to control a significant portion of world trade.
The Biden administration has its work cut out for it over the next four years — not only to repair the relationship but also to forge ahead carefully with a country that demands recognition as an equal. It’s a tricky foreign policy situation that has major ramifications for the future of U.S. manufacturing and economy.