U.S. and European companies will have to spend as much as $1 trillion to replace Chinese suppliers, but the expense will be worth it, according to Bank of America research cited by CNBC on Tuesday (Aug. 18).
The bank’s researchers, based on a survey of analysts around the world, concluded that Western companies had already started contacting supply chains when COVID-19 accelerated the process. According to the report, 75 percent of companies whose supply chains included China had expanded their efforts to source materials and components closer to home.
The CNBC listed four reasons cited by the BoA researchers for the move toward more local sourcing: trade fights, national security issues, climate change and increased automation.
BofA’s Candace Browning said, according to CNBC: “While COVID has acted as a catalyst to accelerate this change, the underlying reasons are grounded in a shift to ‘stakeholder capitalism,’ concluding relocation favors a broader community of shareholders, consumers, employees and the state.”
The BofA report states that companies are most likely to bring operations from China to their home countries, but absent that, to bring them to countries that are eyed as “allies.”
Among the factors driving what often is called “onshoring” are tax breaks that governments at various levels are offering to companies that repatriate jobs.
Additionally, President Donald Trump has said he is considering taking extreme measures against Chinese companies for a variety of reasons. He already has ordered ByteDance, the owner of Tik-Tok, to sell the app’s U.S. operation to a U.S. company, citing security concerns.
The relocation of U.S. manufacturing jobs to China has been generating political controversy in the United States since at least the late 1980s, but for the most part has continued relatively unabated until recently.
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