Not the start of the decline of globalisation – just of China's dominance

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Determined to have his FDR moment, Joe Biden’s latest policy seems likely to have put the frighteners on China, amid what experts are describing as a fundamental reworking of global supply chains and international trade.

Launched on Tuesday, the White House Council on Supply Chain Resilience is central to the Biden administration’s efforts to strengthen both the US economy and its manufacturing capacity.

Those efforts, which his team have dubbed “Bidenomics”, are intended to lower costs for American families and ensure they get products “they need when they need them”, while concurrently supporting good-paying, domestic union jobs.

Coming with the Inflation Reduction Act, seen by many as a spur to growth in US electric vehicle production, the focus appears on local at the expense of international.

In his new book, The Death of Globalisation, John Manners-Bell described the Inflation Reduction Act as both landmark legislation and a protectionist policy that would affect every one of the US’s trading partners, with the possible exception of Mexico.

And, as far as Mr Manners-Bell is concerned, the legislation will likely also prove to be uniformly counter-productive.

Counter-productive or not, the Biden administration has shown capability in overcoming major supply chain issues, with the Inflation Reduction Act part of a package of measures that took supply chain pressures from near-record highs during Covid, to below their pre-pandemic levels.

US success offers a sharp contrast to the post-pandemic fortunes of China, which is looking at reduced economic output, with forecast 2024 GDP down, from an expected 4.8%, to 4.4%, according to the World Bank.

China also recorded its first-ever quarterly deficit in foreign direct investment this month.

According to June’s annual US-China Business Council survey, 35% of respondents said they had cut or paused Chinese investments this year, up from 22% in 2022, with 73% citing increased costs and uncertainties over China-US tensions.

American business is also voting with its feet: 61% of those polled by the Department of Commerce’s Office of Textiles and Apparel said China was no longer their top supplier.

These figures are likely bringing cheer to Mexico, which cemented its places as the US’s top trading partner this year, with $263bn in trade over the first four months.

Adding to all this are the ongoing discussions surrounding decoupling from China and the need for shippers to have China+1 strategies in place.

Beijing appears to have taken heed of all these signals.

Less than 24 hours after the announcement of the new White House supply chain council, Chinese premier Li Qiang took to the stage at the first China International Supply Chain Expo, urging the international community to rebuff “the rise of global protectionism”.

He said: “The international community must be more wary of the challenges and risks brought about by protectionism and uncontrolled globalisation. China is a participant and beneficiary of global industrial and supply chain cooperation, but it is also a firm defender and builder. We are willing to build closer production and industrial supply chain partnerships with all countries.”

Given the success seen elsewhere, Mr Li’s comments could betray a fear that what is happening is not so much an end of globalisation, but rather the end of China’s dominance over it.

Economics professor at New Taipei’s Tamkang University Tsai Ming-fang told China News the necessity of Chinese supply chains in global trade had been greatly reduced in recent years, and companies were ‘upping sticks’.

Mr Tsai said without the dependence on China, companies were transferring to the likes of India, Mexico and Vietnam, adding “the trend is very obvious”.

Whether Mr Biden’s intention was to further provoke this decoupling from China is unknown, but what is likely is that his intention, as from the start of his tenure, was to return the US to its manufacturing glory days, channeling FDR, or perhaps The Wire’s Frank Sobotka.