Decoupling from China would cost West $23.6T, EY finds

The United States, eurozone, and United Kingdom would need to invest a combined $23.6 trillion over the next quarter-century to replicate the supply chains and industrial infrastructure currently dependent on China, according to new analysis by EY-Parthenon published on Monday.logisticsmatters+1

The study, first reported by the Financial Times, estimates that the U.S. alone would bear the largest share of the burden at $13.7 trillion, with the eurozone and UK accounting for the remainder. At roughly $550 billion per year, the annual investment required from the U.S. government and American companies is comparable in scale to the country's existing defense budget.ft+1

A Staggering Price Tag for Reshoring

The findings arrive as both the Trump administration and European policymakers grapple with escalating trade tensions and growing calls to reduce reliance on Chinese manufacturing, particularly in critical minerals, electronics, and advanced manufacturing. China's dominance over global supply chains has drawn increased scrutiny in recent years, with Beijing's periodic use of export controls on minerals like gallium and germanium underscoring the vulnerability of Western economies.cfr+1

EY-Parthenon warned that reducing dependence on China could increase manufacturing costs and consumer prices, adding inflationary pressure to economies already navigating uneven recoveries. The analysis suggests the costs would span sectors from pharmaceuticals and semiconductors to clean energy and raw materials processing, where China holds entrenched advantages built over decades of state-directed investment.mk

De-risking vs. Decoupling

The study reinforces a theme that has dominated Western economic policy debates: that full decoupling may be neither practical nor affordable, lending weight to the "de-risking" approach favored by many European leaders. The European Union has acknowledged the difficulty of unwinding trade ties, with recent analysis finding that China has been more successful at diversifying its own supply chains than Europe has.eh4s

The U.S. government has mobilized more than $30 billion to secure critical mineral supply chains, and Washington and Canberra signed a framework committing $1 billion toward financing new mining projects. But those sums pale against the trillions the EY-Parthenon study suggests would be needed for a comprehensive break.spglobal+1

"Decoupling from China would come at the cost of American opportunity and influence," Gabriel Collins, a fellow at Rice University's Baker Institute, has argued, advocating instead for targeted restrictions on sensitive technology and military-linked sectors.bakerinstitute

The research underscores a central tension in global trade policy: Western governments increasingly view China as a strategic competitor, yet the economic entanglement runs so deep that severing it would require investments on a scale few electorates are likely to support.