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Global Supply Chains: The Looming “Great Reallocationâ€

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  • Alfaro, Laura
  • Chor, Davin

Abstract

Global supply chains have come under unprecedented stress as a result of US-China trade tensions, the Covid-19 pandemic, and geopolitical shocks. We document shifts in the pattern of US participation in global value chains over the last four decades, in terms of partner countries, products, and modes, with a focus on the last five years (2017-2022). The available data point to a looming “great reallocation†in supply chain activity: Direct US sourcing from China has decreased, with low-wage locations (principally: Vietnam) and nearshoring/friendshoring alternatives (notably: Mexico) gaining in import share. The production line positioning of the US’ imports has also become more upstream, which is indicative of some reshoring of production stages. We sound several cautionary notes over the policies that have set this reallocation in motion: It is unclear if these measures will reduce US dependence on supply chains linked to China, and there are moreover already signs that prices of imports from Vietnam and Mexico are on the rise.

Suggested Citation

  • Alfaro, Laura & Chor, Davin, 2023. "Global Supply Chains: The Looming “Great Reallocationâ€," CEPR Discussion Papers 18457, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18457
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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • F6 - International Economics - - Economic Impacts of Globalization

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