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The Future of U.S. Supply Chains: National Security and the Pandemic
Region: Asia
Theme: Economics
Published July 30, 2021
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The COVID-19 pandemic has been the most significant economic disruption to the international economy since the Great Depression. The IMF estimates that the global economy contracted by 3.5 percent last year, while the WTO has projected a 5.3 percent decline in global trade. The economic impact on the United States has been significant as well. Early in the pandemic the United States experienced shortages of critical medical supplies and products, while the need to social distance has continued to place restrictions on the overall economy. For 2020, the pandemic saw GDP decline by 2.3 percent, while exports fell by 12.9 percent and imports by 6.4 percent. All of this has resulted an increased focus on supply chains and their vulnerabilities.

While COVID-19 has raised concern about disruptions to U.S. supply chains, the pandemic is not the only disruption that supply chains have faced in recent years. Over the last decade, natural disasters such as the 2011 earthquake and tsunami in Japan and political shifts such as the United Kingdom’s decision to leave the European Union, have disrupted supply chains. As the McKinsey Global Institute notes, these disruptions to supply chains are becoming increasingly frequent. Disruptions of more than 2 months now occur, on average, once every 4.9 years.

What makes this disruption different is that it is occurring at a time of increasing geopolitical tensions and growing concern over U.S. supply chains’ dependence on China. Since 2018, the United States and China have been engaged in a trade war, while the Trump administration began raising concerns about the security of U.S. supply chains in China prior to the pandemic. Once the pandemic began, it simply became an additional avenue for the Trump administration to pursue its goal of moving U.S. supply chains outside of China. With the election of Joe Biden as president there had been hope that the United States might pursue different policies, but the Biden administration also placed an emphasis on securing supply chains in light of the pandemic and bipartisan concern over China’s role in U.S. supply chains.

To explore these issues, this chapter first examines the Trump administration’s approach to China and supply chains. It then considers how supply chains have performed during the pandemic and how the Biden administration and Congress have approached the issue. Lastly, it considers what challenges the administration will face in adjusting supply chains and what options it might have.

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