Global Supply Chains: The Looming “Great Reallocation”

August 2023, Powerpoint: "Optimism of 1990s & 2000s: Falling transportation costs & policy barriers + technological change ⎼ Supply chains… improve efficiency, by allowing firms to perform stages/procure inputs in different locations Ø Opportunities for growth and development (WB, 2020) • Concerns of 2010s & 2020s: Natural disasters, climate change, pandemics, war, national security – Supply chains… expose firms and countries to disruption risks Ø Backlash in developed nations (Colantone et al., 2022; Alfaro, Chen and Chor, 2023) à rise in trade barriers o “Favoring the friendshoring of supply chains … will lower the risks to our economy” (Yellen, 2022) • This Paper: Broad-ranging look at the evolution of US supply chains from 1990s to 2022 (focus on post-2017; available data) ⎼ Partners, products, modes, value chain position, economic activity; for signs of friend/near/reshoring ü Not Deglobalization (yet): Trade flows have rebounded, US imports at all-time high in 2022 (Antràs, 2020; Baldwin, 2021) ü A “Great Reallocation”: GVC reconfiguration (2017-2022). o Decrease in China’s product-level import shares à Increase in import shares from “friends”, including: Vietnam (low cost), Mexico (nearshoring / regional GVCs) o Caution: i. Rising costs: Evidence of rising unit values from Vietnam and Mexico ii. And may not ultimately reduce dependence on China."