Global Supply Chains: The Looming 'Great Reallocation'

Global supply chains have come under unprecedented stress as a result of U.S.-China trade tensions, the COVID-19 pandemic, and geopolitical shocks. We document shifts in the pattern of U.S. 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 U.S. 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 U.S.’ 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 U.S. 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.