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Global supply chains already reeling from war and pandemic now suffer another setback as the most recent Covid-19 lockdowns in China now threaten supply chain resiliency through the US holiday season.
The US disproportionately relies on China as a source of imported goods and despite recent efforts to onshore production, Chinese imports still comprise approximately 35% of all electronics and 25% of all goods sold in America.
Business analysts indicate the lockdowns will affect a wide range of products ranging from high-end electronics to household staples including furniture, clothing, and goods manufactured from plastic. They also fear manufacturing and production levels in China may not return to recent levels until sometime mid-year.
Additionally, even if, or when, Chinese production and manufacturing reach their previous levels, bottlenecks at both US and Chinese ports will continue to impair supply chain functions. Shipping delays exacerbate the problem with finished goods that previously took 46 days for transport now taking approximately 111 days.
Producers of automobiles and electronic goods are among those being most hard hit. For example, over one-half of all Tesla's sold in 2021 were made in China. Production in China slumped 10% in the first three weeks alone of China's lockdowns.
Tesla and other auto manufacturers attempt to limit the effect of lockdowns by requiring workers stay on premise, including sleeping onsite. However, this does not address delivery delays of the parts and components required to produce an automobile.
Apple faces similar problems with nearly 100 of its top 200 input suppliers affected by the Covid lockdowns. Apple reports significant delays in obtaining even the most basic product inputs, such as cardboard boxes, as well as truck drivers to transport its goods.
And what does this mean for US consumers? Supply shortages and price hikes contributing to an already escalating rate of inflation. Indeed, the inflation rate for all goods and services in March 2022 was 8.5%, with the rate of inflation for services reaching 4.4%. Accordingly, some economists predict, and recommend, consuming 'experiences' rather than goods during the upcoming holiday season.
