Supply Chain Decoupling
The great untangling — reshoring, friend-shoring, and the cost of security.
US imports from China (2024)
-18%
Change since 2018 peak
$52B
CHIPS Act funding
$370B
IRA clean energy investment
For decades, the US and China built intertwined supply chains. Now both sides are pulling apart. The US is reducing dependence on China for critical goods — chips, batteries, rare earths. China is building self-sufficiency in technologies the US might cut off. The result: costly, slow, partial decoupling reshaping global trade.
Critical Dependencies
Despite trade tensions, the US remains heavily dependent on China for many critical inputs:
🔋 Lithium Batteries
75%
China's global share
EVs, grid storage
☀️ Solar Panels
80%
China's global share
Clean energy
⚡ Rare Earths
60%
Processing share
EVs, missiles
💊 Pharma APIs
40%
US import share
Generic drugs
🖥️ Electronics
70%
US import share
Phones, laptops
🔩 Industrial
35%
Various materials
Steel, chemicals
China's leverage: In December 2024, China banned exports of gallium, germanium, and antimony to the US — critical for chips and defense. China can weaponize supply chains too.
The Flow of Goods
📱 Smartphone Supply Chain
Raw Materials
China, DRC
China, DRC
→
Processing
China
China
→
Chip Fab
Taiwan
Taiwan
→
Assembly
China
China
→
Consumer
USA
USA
China dominates multiple stages of most supply chains. Even products assembled elsewhere depend on Chinese components.
Decoupling Strategies
🇺🇸 US Approach
- Reshoring: Bring manufacturing home (CHIPS Act, IRA)
- Friend-shoring: Shift to allies (Mexico, Vietnam, India)
- Stockpiling: Build reserves of critical materials
- Export controls: Deny China key technologies
- Tariffs: Make Chinese goods expensive
🇨🇳 China Approach
- Self-sufficiency: "Dual circulation" strategy
- Indigenous tech: Domestic alternatives to US tech
- Export controls: Restrict critical minerals
- Belt & Road: Diversify partners away from West
- Stockpiling: Commodities, food, chips reserves
US Reshoring Projects
🏭 Major Announced Investments
TSMC
Arizona semiconductor fabs
$65B
Intel
Ohio chip manufacturing
$28B
Micron
New York memory fab
$100B
Samsung
Texas semiconductor expansion
$17B
LG + Honda
Ohio EV battery plant
$4.4B
Panasonic
Kansas battery plant
$4B
The catch: These facilities won't be operational for years. TSMC Arizona has faced delays. Even at full capacity, US fabs produce a fraction of Asian output.
The "China Plus One" Shift
📦 Alternative Destinations
🇻🇳VietnamElectronics, textiles. Apple, Samsung suppliers moving.↑ Fast
🇮🇳IndiaiPhones, pharma. Huge potential, infrastructure gaps.↑ Growing
🇲🇽MexicoAuto parts, electronics. Nearshoring boom.↑ Fast
🇹🇭ThailandAuto manufacturing. Established base.↑ Steady
🇨🇳ChinaStill dominant. Hard to fully replace.↓ Share
Reality Check
🚧 Obstacles
- Cost: 20-50% more expensive elsewhere
- Time: Building capacity takes 5-10 years
- Scale: No one matches China's ecosystem
- Transshipment: Chinese goods reroute through third countries
📊 Data
- US-China imports: $540B (2018) → $427B (2024)
- But Vietnam, Mexico imports up sharply
- Often contains Chinese components
- "Decoupling" partly just rerouting
Bottom line: True decoupling requires accepting higher costs or a decade building alternatives. Current policy is "de-risking" — reducing critical vulnerabilities — not complete separation.