President Donald Trump’s fast-pivoting trade agenda — threatening tariffs on Mexico and Canada, then suspending them hours before they took effect — appears to be undermining a new business strategy designed to boost America’s geopolitical leverage. Colloquially known as “friendshoring,” the policy is a way to hedge major industries like technology against big supply shocks, while reducing dependence on China and boxing out Beijing in the global competition for economic influence. Over the last several years, a number of key industries — notably consumer electronics and semiconductors, as well as clean energy, cars and pharmaceuticals — have started to diversify their manufacturing and supply chains across multiple countries allied with the U.S. Friendshoring was actively encouraged by the Biden administration to reduce China's ability to throw its weight around. And given the practical reality that making everything in the U.S. would be exorbitantly expensive, it already appealed to manufacturers whose operations were disrupted by the first-term Trump U.S.-China trade war, as well as the pandemic and rising geopolitical tensions — events that brought home just how fragile global supply chains are. Multinational manufacturers shifted work away from Chinese factories to destinations like Mexico, Vietnam, Malaysia and India. Friendshoring even became popular with both sides of the global tech race: Exporters from China keen to preserve sales to the U.S., their biggest market, and American companies eager to reduce reliance on factories in Asia. Under Trump, that whole idea suddenly looks more vulnerable. “If companies then moved to a third country, and that third country is now subject to Trump tariffs, moving to that country becomes a lot less attractive,” said Wendy Cutler, a longtime diplomat and vice president at the Asia Society Policy Institute. If anything, the list of “safe” destinations is dwindling. Trump has previewed universal tariffs. The United States is running high trade deficits with several friendly Asian countries — including some that partnered with the Biden administration on friendshoring opportunities in the semiconductor space — one main reason Trump went after Europe, China, Canada and Mexico. “If you listen to Trump carefully,” said Cutler, “he should be in a matter of time directing his attention to some of those countries. Particularly, I would argue, like Vietnam, where our bilateral deficit with them has just skyrocketed in recent years, and part of that is due to U.S. companies leaving China and reshoring to Vietnam — but also a concern that Chinese investment there is increasing as a way to avoid U.S. tariffs.” Why destabilize a complex, useful system that important industries have come to rely on? One reason might be that it’s just too complicated for the political moment: Trump wants manufacturing literally in the U.S., not threaded through a web of allies. “[Trump is] more interested in all of that investment coming back to the United States, and so companies who have moved operations elsewhere, at least in his view of the world, seem to be either unpatriotic or not contributing to America's greatness,” Cutler said. Biden, too, wanted to support domestic manufacturing, and at times his industrial policy blurred the line between friendshoring and straight-up reshoring, leaning into the political appeal of “Made in America” and new jobs as the election neared. Some of his landmark laws, like the CHIPS and Science Act and Inflation Reduction Act, sent a clear message that it wasn’t enough for technologies critical to national security — namely, advanced chips and certain renewable energy products — to be made by allies. They should be made here. But in general, anything that moved production out of China — even if it meant to Mexico or Southeast Asia — was still welcome, as it cut reliance on Beijing. Biden’s administration rolled out programs to expand the practice of friendshoring (including foreign aid for chip suppliers investing in approved allied nations), struck bilateral supply chain deals with countries like South Korea and entered a critical minerals partnership with the EU and 13 other nations. Trump, by contrast, is showing a clear preference for purely local manufacturing (and the energy it fires up in his populist base), said Mary Lovely, an economist researching Chinese tariffs and movements in global supply chains at the Peterson Institute for International Economics. “He rarely [pays] much attention to the fact that production is fragmented in general. It's either made overseas or it's made here,” she told DFD. Trump’s would-be deputies like Commerce secretary nominee Howard Lutnick seem to agree. “My job is to bring domestic production of semiconductors home to America, and then we are going to attack the supply chain so we have the full supply chain [and] so we can be independent from a national security perspective,” Lutnick told senators at his confirmation hearing. That doesn’t mean companies are just going to pick up and move. There are shorter-term export strategies they can consider first — like automakers deciding to sell more cars to Europe instead of the U.S. while tariffs are in place. Relocating quickly requires major shifts in capital and can be a real headache for industries with intricate, tangled supply chains. The auto sector doesn’t move on monthly cycles, and any investment in a country is meant as a years-long bet. For chipmaking, described as “the most complex, expensive engineering task humanity undertakes,” the calculus gets even more complicated. Building a cutting-edge semiconductor factory easily costs upwards of $10 billion, and companies meticulously assess up to 500 factors before investing, according to research in a recent sharp critique of Trump's proposed tariffs on foreign chips from Stephen Ezell, vice president of global innovation policy at the Information Technology and Innovation Foundation think tank. All together, the changing dynamics could cause problems for American companies in competitive global industries like tech. Cutler worries that while the U.S. will remain a very important market, there are risks that other countries will continue to become more deeply integrated with China, whose authoritarian government is arguably more predictable and has signaled it’s open for business. Lovely predicted the main impact will be reduced global investment in manufacturing. “He's kind of threatened everybody, so it's not clear where you go, and what that does is it raises the level of return that you would need to do to invest,” she told DFD. “We hear from corporates that there's just an awful lot of confusion. I think they're spending a lot of time trying to figure out where this is all going, and less time focusing on their operations.”
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