The Chinese government has nationalized its large N95 mask manufacturers, making it difficult and expensive for importers in the United States to access the much needed medical product.

What Happened

iPromo, a large importer of N95 masks and other pandemic related medical goods, had orders comprising millions of N95 masks canceled last week. The importer’s CEO, Leo Friedman, told Forbes, “[The N95 masks] were for hospitals and state governments. We told them last week that we can’t get them.”

According to Forbes, the Chinese government is in full control of the supply of N95 masks, having taken over manufacturers such as Dasheng Health Products and banning them from engaging directly with buyers. Buyers now have to source these products through middlemen, leading to a seven-fold increase in price.

Friedman stated, “There are only a handful of N95 factories in China and now they are all enforcing the nationalization. They are busy with back orders to service Russian and European orders, I was told.”

Why It Matters

Before the pandemic struck, China manufactured half of the world’s masks, and as of last month, it ramped up supply 12-fold but secured most of the output for domestic use, reported The New York Times.

Peter Navarro, an adviser to President Donald Trump, told the Times that Beijing had taken over factories that made masks on behalf of U.S. companies. He stated that the Chinese had chosen to “nationalize effectively 3M, our company.”

Earlier in April, President Trump imposed the Defense Production Act, which gives the federal government rights over managing operations at 3M Co (NYSE: MMM). Florida officials alleged that 3M was prioritizing sales to foreign governments at the cost of American healthcare workers.

The company agreed to produce 100 million masks a month, but after the Center for Disease Control and Prevention stated that masks prevent COVID-19, the U.S. need for them escalated to 50 billion pieces, a gap the company cannot plug. The outbreak has exposed the vulnerabilities of U.S. dependence on China, which has now translated into potential health and business risks, reports Forbes.

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