Reshaping global supply chains could cost US$23.6trln by 2050
EY estimates scale of the investment to replicate China-linked supply chains across the US, Eurozone and UK.
Manufacturing, mining, and power and utilities – some of the sectors most reliant on Chinese inputs – account for nearly US$13trln of the US$23.6trln.
The analysis from EY and Parthenon highlights the trade-offs for businesses and governments alike over the coming years.
Duplicating East-West supply chains is estimated to cost US$13.7trln in the US, US$9.1trln in the Eurozone and US$800bln in the UK, to rebuild physical infrastructure and critical capabilities such as R&D, software, advanced manufacturing, transport networks, supplier ecosystems and workforce skills.
The scale of investment needed to achieve full decoupling of supply chains is expected to increase materially as the transition progresses.
The analysis raises questions about how these costs will be absorbed – if governments fund the transition, deficits could increase by nearly one percentage point of GDP annually through 2050, while if businesses bear the costs, they could face increases of up to twice their current capital expenditure.
The report, Mind the (supply) gap: balancing cost and resilience in cross-border value chains, comes as the introduction of US trade tariffs and, more recently, ongoing disruptions in the Strait of Hormuz, have forced companies to reassess assumptions around energy flows, freight availability, inflation expectations and business continuity.
