Coronavirus Will Change How We Think About Supply Chains

In the ancient days of 2018, the Trump administration was panned by experts for imposing tariffs on imported steel on a global basis for national security reasons. As he tweeted at the time, “IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!” But to most economists, China was the real reason for disruptions in the metal market, and imposing tariffs additionally on U.S. allies was nonsensical, the argument went: After all, even if America lost its steel industry altogether, we would still be able to count on supplies from allies in North America and Europe.

Fast forward to 2020. Just this week, U.S. allies are considering substantial border restrictions, including shutting down ports and restricting exports. While there’s no indication that the coronavirus per se is being transmitted through commerce, one can imagine a perfect storm where deep recessions plus mounting geopolitical tensions limit the U.S.’ access to its normal supply chains and the lack of homegrown capacity in various product markets limit the government’s ability to nimbly respond to threats. Reasonable people can differ over whether Trump’s steel tariffs were the right response at the right time. In the years ahead, however, expect to see more support from Democrats, Republicans, academics, and diplomats for the notion that government has a much bigger role to play in creating adequate redundancy in supply chains — resilient even to trade shocks from allies. This will be a substantial reorientation from even the very recent past.

Todd N. Tucker is Director of Governance Studies at the Roosevelt Institute. Follow him @toddntucker.

(Crossposted — with links — from Politico.)