"Supply Chains Shifting as US-China Trade Sees Further Decline"

The writer, A. Gary Shilling is old.
Meaning he has seen a lot. He was Merrill Lynch's first Chief Economist and, similarly to Société Générale's Albert Edwards has been concerned with the risks of not-so-benign deflation [as compared with the deflationary growth of the 1800's]

From Financial Sense, Sep 30 –

The intensifying trade wars and their negative effects on economic activity globally show no sign of abating as Trump and de-facto Chinese President-for-life Xi continue to dig into their positions. As discussed in past Insights, some interim trade deal may be reached in coming months. Trump obviously doesn’t want to enter the 2020 election empty-handed and in the midst of a recession, to boot. Xi is confronting declining economic growth in China, and actual real GDP gains are probably only about half the 6.2% year-over-year rate reported for the second quarter, as we discussed most recently in “Suspicious Chinese Data” in our August 2019 report.

The economic slide will intensify as Chinese and foreign producers accelerate the movement of their operations out of that country to those that have low or even lower labor costs and are out of the line of fire in the U.S.-China trade war. These include Vietnam, India, Malaysia, Taiwan and Thailand. Already, the direct and indirect effects of the U.S.-China trade war have reduced China from being America’s largest trading partner to third place behind Mexico and Canada. In the first half of 2019, U.S. bilateral trade with China fell 14%.

Foxconn, which assembles Apple’s iPhones and iPads, mostly in China, is considering shifting production elsewhere. It has plants in Brazil, Mexico, Japan, Vietnam, Indonesia, the Czech Republic, the U.S., Australia and other countries. Only 25% of its manufacturing is outside China, but Young-Way Liu, the head of Foxconn’s semiconductor group, recently said that Foxconn’s manufacturing capacity outside China is adequate to supply Apple and other customers with products for the U.S. market, and that production could be expanded at facilities worldwide “according to the needs of our clients.” Foxconn said it put over $213 million into its Indian subsidiary in late 2018 and early 2019, and plans to invest more in Vietnam....MORE