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Sometimes, being intentional about not saying something is the best way to communicate.
Moving on, here’s the supply chain and logistics news that caught my attention this week:
- U.S. Supply Chains Deemed Vulnerable to Chinese Exploitation (WSJ – sub. req’d)
- Appeals court pauses California law requiring companies to disclose climate risks (The Hill)
- Trump cuts tariffs on beef, coffee and other foods as inflation concerns mount (Reuters)
- U.S. trade deficit drops 24% in August as Trump’s tariffs reduce imports (ABC News)
- EU to end de minimis: but as one ecommerce door closes, another will open (The Loadstar)
- GE Appliances Invests $150 Million in U.S. Suppliers in Reshoring Push (WSJ – sub. req’d)
- Tesla requires suppliers to avoid China-made parts for US cars, WSJ reports
- Kroger acknowledges that its bet on robotics went too far (Grocery Dive)
- Einride Sues Maersk Over U.S. Rollout of Battery-Electric Big Rigs (WSJ – sub. req’d)
- Class 8 Truck Sales Tumble 30% in October (Transport Topics)
- EPA to Proceed With 2027 NOx Rules Timeline (Transport Topics)
Stating the Obvious: China Is a Big Supply Chain Risk
As reported by James T. Areddy in the Wall Street Journal, “China could exploit the U.S.’s dependence on Chinese supply chains for products such as pharmaceuticals and electrical equipment, according to a new report to Congress that urged lawmakers to force industries to disclose such risks.”
Here are the opening paragraphs from the report to Congress:
China has long made clear its willingness to use its economic heft to advance the Chinese Communist Party’s (CCP) strategic interests. In the past five years, however, it has intensified this strategy by prioritizing control over key supply chains. China has already deployed export controls on critical minerals as a coercive tool, including to seek policy concessions in trade negotiations with the United States and to punish other countries. However, critical minerals are just one among several key sectors in which the United States is highly dependent on Chinese sources or could become dependent in the near future.
Other key sectors include active pharmaceutical ingredients (APIs), printed circuit boards (PCBs), and foundational semiconductors — all of which are vital to national security and commercial stability and for which even short-term, partial disruption could cripple critical industries and military readiness. With potentially as much as one quarter of all APIs sourced from China directly — or indirectly through India — U.S. pharmaceutical supply chains face a vulnerability that could have drastic consequences for the American healthcare system. PCBs are critical to all electronics — from the simplest to the most advanced. Though Beijing faces practical barriers to restricting Chinese PCB content to U.S. end users, China has substantial and growing leverage in this important sector, both via direct sales to the United States and much more significantly via made-in-China PCBs embedded in global electronics products. Foundational semiconductors are a likely future vulnerability. China’s breakneck expansion in production capacity threatens to flood the market and put competitors out of business if left unaddressed. In that case, the United States may soon depend on access to China’s chip industry for producing a wide variety of electronic devices.
Is this really a surprise to anyone who has been paying attention, especially since 2020 when the Covid pandemic halted exports from China, which caused widespread supply chain disruptions?
Look at the recent turmoil in the automotive industry, for example, caused by the dispute between the Netherlands and China over ownership of the chipmaker Nexperia. The standoff between the two countries “threatened supplies of semiconductors vital for global auto manufacturing,” as reported by AP. “Nexperia chips are widely used by carmakers in North America, Japan and South Korea. Automakers warned in recent weeks that they were running low on the chips, and Honda was forced to shut down a factory in Mexico producing its popular HR-V crossover for North American markets.”
Therefore, it’s not surprising to see some of the headlines linked above, such as GE Appliances investing in U.S. suppliers and Tesla requiring suppliers to avoid China-made parts for US cars.
Simply put, if your supply chain is highly (or solely) dependent on raw materials or components from China and you’re not exploring ways right now to reduce or eliminate this dependency, what are you waiting for? The future success of your company depends on addressing this risk now. Easier said than done, I know, but doing nothing is the worst option of all.
And on that uplifting note, have a meaningful weekend!
Song of the Week: “I Can’t Feel You” by Camouflage
