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Trump Administration to Assess Domestic Manufacturing Capacity, Resiliency of U.S. Supply Chain

President Trump issued an executive order on 21 July instructing his administration to prepare by April 2018 an assessment of the domestic manufacturing capacity and resiliency of the U.S. supply chain for military and civilian material, raw materials and other goods that are essential to U.S. national security. While no specific actions to address any identified deficiencies are mentioned in the EO, this report could potentially lead to the adoption at some point in the future of trade and/or investment restrictions on goods that are identified as essential to U.S. national security, including Hong Kong and mainland Chinese goods.

Specifically, the report would:

  • identify the military and civilian materiel, raw materials and other goods that are essential to national security;
  • identify the manufacturing capabilities essential to producing the goods identified, including emerging capabilities;
  • identify the defence, intelligence, homeland, economic, natural, geopolitical or other contingencies that may disrupt, strain, compromise or eliminate the supply chains of identified goods (including as a result of the elimination of, or failure to develop domestically, the identified capabilities) and that are sufficiently likely to arise so as to require reasonable preparation for their occurrence;
  • assess the resiliency and capacity of the manufacturing and defence industrial base and supply chains of the United States to support national security needs upon the occurrence of the identified contingencies, including an assessment of (i) the manufacturing capacity of the United States and the physical plant capacity of the defence industrial base, including their ability to modernise to meet future needs, (ii) gaps in national-security-related domestic manufacturing capabilities, including non-existent, extinct, threatened and single-point-of-failure capabilities, (iii) supply chains with single points of failure or limited resiliency, especially at suppliers third-tier and lower, (iv) energy consumption and opportunities to increase resiliency through better energy management, (v) current domestic education and manufacturing workforce skills, (vi) exclusive or dominant supply of the identified goods (or components thereof) by or through nations that are or are likely to become unfriendly or unstable, and (vii) the availability of substitutes for or alternative sources for the identified goods;
  • identify the causes of any aspect of the defence industrial base or national-security-related supply chains assessed as deficient; and
  • recommend such legislative, regulatory and policy changes and other actions by the president or the heads of agencies as they deem appropriate based upon a reasoned assessment that the benefits outweigh the costs (broadly defined to include any economic, strategic and national security benefits or costs) over the short, medium and long run to (i) avoid, or prepare for, any identified contingencies, (ii) ameliorate any aspect of the defence industrial base or national-security-related supply chains assessed as deficient, and (iii) strengthen the U.S. manufacturing capacity and defence industrial base and increase the resiliency of supply chains critical to national security.

The EO reiterates the economic and national security importance for the Trump administration of a healthy manufacturing and defence industrial base as well as a resilient U.S. supply chain. It notes that modern supply chains are often long and the ability of the United States to manufacture or obtain goods critical to national security could be hampered by an inability to obtain various essential components, which themselves may not be directly related to national security. The president therefore believes that the United States must maintain a manufacturing and defence industrial base and supply chains capable of manufacturing or supplying those items.

The EO adds that the loss of more than 60,000 U.S. factories, key companies and almost five million manufacturing jobs since 2000 threatens to undermine the capacity and capabilities of U.S. manufacturers to meet national defence requirements and raises concerns about the health of the manufacturing and defence industrial base. Moreover, the loss of additional companies, factories or elements of supply chains could impair domestic capacity to create, maintain, protect, expand or restore capabilities essential for national security. Strategic support for a vibrant domestic manufacturing sector, a vibrant defence industrial base and resilient supply chains is therefore a significant national priority for the current administration.

Content provided by Picture: HKTDC Research
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