The Friday Report: July 3rd, 2019

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

U.S. Trade War Travels to India

Following the June 1st decision by President Trump to end trade concessions on $5.7 billion of goods shipped by India to the United States, India announced imposition of higher customs duties.  The goods included leather products, pharmaceuticals, chemical and plastic items and imitation jewelry.  Striking back at the U.S., India imposed increased charges on 28 products including apples, almonds, walnuts, chickpeas, and phosphoric acid.  The new tariffs are anticipated to generate approximately $217 million in additional revenue.

The new tariffs were initiated only days before a visit by Michael Pompeo, U.S. Secretary of State.  The visit was intended to help develop deeper defense and energy ties between the two countries, but trade tensions have been escalating following the withdrawal of India’s preferential trade status by the U.S.

Google Shifts More Hardware Production from China

To avoid more U.S. tariffs and “an increasingly hostile government in Beijing”, Alphabet Inc.’s Google is shifting some production of its Nest thermostats and server hardware from mainland China.  Much of its production of motherboards bound for America have already been moved to Taiwan to avoid a 25 percent tariff.  U.S. bound production of Nest devices was also moved to Taiwan and Malaysia.  As the Chinese government shows signs of pushing back against American corporations including Ford Motor Corporation to FedEx Corporation, more American companies are looking for alternative production sites.

In other news, Google is stretching its footprint in other directions, including creating a new campus in Taipei with an expanded staff.  Google is also building its own data centers in the United States as well as elsewhere to power the world’s largest mobile platform.  The new hub will also help Google offer search and productivity tools on a cloud services platform.

China’s Rare Earth Materials and the Magnets That Use Them

China accounts for over 90 percent of the global production of rare earth magnets, used in goods as diverse as vacuum cleaners to fighter planes and vehicles.  One worrying issue is the Chinese signal that it is preparing to use its dominance of the global rare earths industry to strike back at American tariff policy, including the blacklisting of Huawei Technologies Company.  Many modern devices depend upon rare earth metals and alloys and rare earth magnets are considered to be essential to many military weapons.

Of the $1.7 billion in Chinese magnet exports in 2018, the United States exported nearly $395 million, $257 million of which was from China   Many manufacturing facilities that produce magnets, including those in Japan and Germany rely on rare earth inputs from China.

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