US companies are 'friendshoring' from China to India. We are strengthening the BRICS bloc instead.

Some American companies are diversifying their supply chains away from China, and setting up new supplier relationships in India. However, analysis of trade flows suggests that India is simply increasing their buys from China to satisfy the new US demand.

In several key industries--green energy, electronics, and medicine--India's dependency on China has soared. Instead of diversifying our risk, it is multiplied: American firms' exposure to China is still there, while adding India's.

India and China are both BRICS countries, along with Russia. Ironically as India's assembly plants replace China's in some US companies' supply chains, India's trade relationships with both China and Russia deepen.

Resources and links:

India’s growing reliance on China poses challenge for U.S. trade strategy

FT, China circumvents US tariffs by shipping more goods via Mexico

Chinese Companies Build Factories in Mexico to Exploit “Friendshoring”

New York Times, How India Profits From Its Neutrality in the Ukraine War

BRICS Expansion: A New Chapter in Global Economic Growth

Hindustan Times, Number Theory: Is there a China angle to India’s trade deficit?

Closing scene, Lanzhou, Gansu province

[mijmijrm]

i'm not sure why the increasing significance of BRICS is seen as a problem. BRICS doesn't have military bases round the world and doesn't have occupation forces round the world and doesn't foment conflict round the world for political/economic advantage.
More power to BRICS+. Less power to those who thrive on conflict.

[mahtabsoin]

India has a long way to go before its own manufacturing and supply chains are robust and world-class. But it's clear that a lot of growth has happened in the last 7-8 years; momentum is picking up. All said and done, China is a more benevolent superpower than the US currently. In many respects, China is more capitalist country than the US. And ironically, the US is backsliding in terms of personal freedoms and the economic prosperity of its citizens.

[Rdgrefgggfffhjtfvvgfdfvhgffv]

I am currently in Shenzhen, most amazing city, love motherland china, I am from Hong Kong 🇨🇳

[laughingkor]

It has been tough for China to deal with the US which has no plan for the future, because where everything changes hand and starts from scratch every four years.
Therefore, China has a long standing policy of not communicating with any outgoing or foreseeable outgoing government. All eyes will be on whether Xi agrees to meet with Biden during the upcoming Asia-Pacific Economic Corporation leader's summit in mid-November in San Francisco, rafter the November 5th US election.
Can't blame China remains silent on this so far. Why bother to waste time on the US, when China is busily moving forward together with the rest of the world?

[Truthstelling]

The West is just kidding n fooling itself😂😂😂

[michaelloong]

Kevin, your presentation about US/ China relationship and friend-shoring industries to India is so clear that it is surprising that American politicians don't see it. Such friend-shoring does not help the US consumers and in fact helps China to diversify its industries to other countries. It is just a waste of time for the US politicians play anti-China game.

[TCHCrevamp]

Stupid is as stupid does. Keep going America!

[philiptan]

That’s right, the usa is going to be dependent on India but India is dependent on China, so the USA is still dependent on China except for higher costs and longer more complicated supply chain. It is the same western ludicrous policy to become independent of oil from Russia but dependent on India who in turns buys its oil from Russia. The Indian politicians are laughing aloud as the west is paying her as mediator for the same products, its de-risking policy makes it even more risky in terms of cost, delivery, quality.

[ladygracienyc]

America will eventually realize that India is not a friend and will pull back support. The US simplistically looks at India as a counter to China because of their historical animosity. But India needs to grow and get rich fast before unrest breaks-out. They will be transactional and Russia and China offer the best path forward to prosperity and peace in their backyard. They will see the US as distant power seeking to manipulate them to promote America's interests - not theirs

[barryshaw]

China’s got a more advanced education system on average throughout their entire country and they’re not going to stop and wait for other countries to catch up. Heck of an achievement in such a short time.

[Lfiero]

Warwick Powell suggests that the West/US _can not_ 'reindustrialize', the reasoning is that their financialized economy will pull all the money allotted for the reindustrialization away from that process and turn it into stock buybacks and shareholder profits.

[siamcharm]

the chinese industrial ecosystem cannot be duplicated anywhere.

[JeffreyDSachsForPresident]

Two big factors for Price Inflation in the U.S. and other western countries while China prices remain low : (1) tariffs on Chinese goods transferred to American consumers; (2). Added third party (like India and Mexico) costs that again transferred cost of goods to American consumers. End result: China's global trading and exporting are still going stronger and stronger, India and Mexico are laughing all the way to the Bank, American consumers are suffering.

[otakureference]

4:35 correction - INDIA is not part of BRI

[WanderingSword]

The US (politicians) think that they can rely on India because they look at India as some poor country that it can manipulate, and to some extent India is beholden to the US. However, will India willing to play the subservient role to the US like the Philippines? And furthermore, India is still decades away from creating the sort of supply chain like China, and India may never reach it. The reason is very simple, India doesn't have the raw materials to do it. China and Russia is the ultimate synergy that marries one nation with great raw materials (Russia) and manufacturing prowess (China), AND they're right next to each other! That alone will put a huge hurdle in the US politicians' effort to "friendshore" to anywhere else.

[abhaykumar]

Japan had invested so much time and money in India to manufacture vechicle that they can make for cheap in India and export back to Japan for relatively cheaper cost.

Today the Indian govt has put high tax on imports of chinese parts to promote local manufacturing. India is not yet capable of manufacturing everything on its own yet, it takes time, money, and failures to learn the process.

Semi conductor is very new field for India, companies like polymatech and working on it, even TCS has announced its plans to enter semi conductor market. This industry is expected to face failures at the beginning, and thats the price one pays for cheapest moderately skilled labour.

[davidng]

Kevin, thanks for another great report! Congrats on 70k+ subs.

[KennyL]

Great insight. I bet no one in Washington saw this when they started talking friend shoring. Friend shoring to India does not reduce the risk. Instead it increases the risk. This got to be a dumb strategy.

[L-K-K]

We in the West really need to learn how to be part of a global team rather than the BOSS of everyone.
Perhaps the habitual winner takes all mentality makes it scary to give up that BOSS privilege. We think sharing power = giving up all control over our own lives, and whoever has power will use it against us. In other words, we assume everyone acts on the worst of human nature, and no one strives to do better (the cynic) - except maybe ourselves (the deluded). Maybe that's why absolute freedom of speech, protest, and elections are so important to us - because our culture is built on mistrust. We supposedly choose our own leaders, yet we don't and can't trust them because our culture assumes and encourages everyone to act on the worst of human nature. Very sad and ironic. 😔

[davidaaa]

Sun Tzu: "Never interrupt your opponent while he is in the middle of making a mistake."