In fact, the US is taking ambitious steps to reduce its reliance on the Chinese supply chain. Specifically, it is engaged in negotiations over a significant free trade agreement with the United Kingdom. This counterintuitive provision of the initiative significantly increases domestic semiconductor production. It includes a tough national goal — bringing 50% of chip production back onshore. The discussions come amidst heightened scrutiny of trade relations with China, with U.S. Treasury Secretary Janet Yellen actively engaged in dialogues addressing these critical issues.
In response, the U.S. Commerce Secretary stated the administration’s commitment to seeing a trade deal through. In particular, they are watching a key country in Asia. This new deal will make for a more resilient supply chain. In the process, it will create strategic partnerships that will share in the work of alleviating the cost and risk of depending on a single country for critical materials. Those expected transactions will emerge over the next 30 days. This step is an indication of a new and proactive strategy to counter bent, broken or unfair international trade practices.
This new trade reality has a 10% baseline, which is expected to continue going forward. The lack of changes in the tariff rate speaks to the government’s commitment to ensuring equitable trade. Simultaneously, they seek to de-escalate tensions with China and find avenues for cooperation. Thus, the U.S. and our allies should look to make China a more constructive actor. Their stated aim is to reduce inflationary pressures and provide greater certainty in the economy.
U.S. officials continue to call on other nations to tear down their own market barriers. What they’re dreaming about is maintaining the 10% tariff as their best possible negotiating result. Releasing this position helps further the entire strategy. It seeks to establish mutually beneficial trade, allowing nations to prosper together by working together and lowering barriers.
As the U.S. readies itself for these negotiations, it is important to look at the long game here. The government has just July 8th as their target date to make substantial progress in these negotiations. This deadline underscores the urgency of rethinking supply chains and establishing more robust domestic capabilities, particularly in semiconductor manufacturing, which has become a focal point in global trade discussions.
The push for increased domestic chip production is not merely a reaction to current geopolitical dynamics. It represents a long-term vision for the U.S. economy. In addition to addressing specific shortages, by reducing the overall dependency on foreign suppliers, especially from China, the U.S. hopes to improve its technology sovereignty and technology security in general. That vision finds support in the rising awareness of supply chain vulnerabilities, which have been highlighted by impacts of the pandemic and other recent global events.
U.S. officials have high hopes for these deals. They think these agreements can help build more fair trade partnerships, particularly with countries across Asia. They think that creating more open markets will lead to broad, equitable economic growth. Simultaneously, it will address fears about being overly dependent on a single country.