Probable impact of US Elections on global supply chain post-Covid

As the entire world went into the first-ever lockdown of the century, all except the medical staff were confined to their homes. This ensured that everyone stays safe, but every sector of business went into a state of despicableness.

Reason? SUPPLY CHAIN DISRUPTION!

Such is the power of supply chain network especially in this era of Globalization! Any wrong decision can lead to a world full of chaos and violence.

Fortunately for us, the world leaders ensured there was enough supply of essentials required for survival. And now that Covid-19 vaccine shots are being administered, the hopes of Supply chain normalcy seem to be cropping up.

However, one major event that took place towards the fag end of 2020 that could potentially change the way International trade and supply chain worked until now was the U.S. Elections.

As I write this article, Joe Biden is the president-elect and what could it mean to the Supply chain?

During the Presidential debate, Joe Biden emphasized negotiating with the Pacific nations to restructure the international trading rules in order to reduce dependence on China. This would help other Asian & Arabian Countries to improve their economy as they would have the liberty to export more with limited competition from China.

Joe Biden is particularly wanting to support the United States-Mexico-Canada Agreement (USMCA) so that the United Nations’ powers in terms of framing laws for international Supply Chain & International Trade are strengthened. The manufacturing sector in this region will see a boost as North American Countries are given incentives for Automobile manufacturing, especially that of Trucks & cars. With strong agricultural laws, the farmers will get access to the markets in all three countries.

Manufacturers in the US who offshore production and sell the products or services back in the US, have to pay a heart wrenching cumulative tax of 30.8%, to solve this issue. Biden’s policy focuses on local manufacturing, he promised to direct $400 billion in federal procurement towards manufacturing and emphasized on Made in America label.

The federal department many times in the past has claimed that manufacturing certain products is not feasible in America and that has given a huge market to other countries. Biden, while addressing this point, stressed using IT Technology to publish it on a specific website built for the same purpose. Once such requirements are posted on this website, tenders can try their hands on producing such products thus getting eligible for the 10% advance tax credit policy.

During almost all his campaign rallies, Biden mentioned the need to directly support small manufacturers, especially those headed by women, this would ensure the creation of jobs and keep the national per capita income increasing. Biden said he would direct $300 billion towards R&D of electric vehicle technology, 5G, Artificial Intelligence – this ensures procurement of parts required for the same and to ensure smooth supply chain, he promised to amend Custom laws and make it easier to buy.

He said & I quote “While medical supplies and equipment are our most pressing and urgent needs, US supply chain risks are not limited to these items. The US needs to close supply chain vulnerabilities across a range of critical products on which the US is dangerously dependent on foreign suppliers.” This prepares the U.S to be ready for a probable 2nd wave of Covid-19 & any kind of crisis in the future.

Biden spoke about how supply chains laws and the federal Government’s purchasing power can ensure smooth manufacturing of critical parts used in the United States’ defence systems. In this way, not just the end product but also the supply chain of manufacturers receives a boost. Biden mentioned the need to be environment friendly and has pledged to utilize the $500 Billion federal government spends on Zero Emission & 100% clean energy vehicles. This would again create more manufacturing & thus more jobs & thus a bigger growth in the US economy. He also mentioned he would bring in stricter laws that would govern the readiness of environment-friendly technologies in all infrastructure projects, thus, giving opportunities for renewable energy innovation & thus impacting supply chain networks.

All in all, most of Biden’s policies focus on reducing the dependence on China for products & supply chain services. This would only help America as they are moving towards becoming leaders in Mass production, Supply Chain services.

We’ll have to wait & watch how the American labour class reacts to this, since the labour costs are higher in America and the Chinese workforce is almost 5 times larger than in the U.S, the next 4 years is expected to witness intense geopolitical tensions. All the countries that are in Joe Biden’s good books might receive some goodies. In the Post Covid-19 era, America might overpower China on these lines & India must continue to maintain cordial relations with them by being diplomatic on issues & at the same time strive hard to increase in-house production of goods & services through schemes like Atmanirbhar Bharat.

Sumanth S (MBA Batch 2020–22)

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