Global Supply Chains: The Looming “Great Reallocation”
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.
We are grateful to Kadee Russ for her discussion of our paper. We also thank Chad Bown, Anusha Chari, Caroline Freund, Penny Goldberg, Rob Johnson, Nina Pavcnik, and Kei-Mu Yi for helpful conversations, and Tarek Hassan, fDi Intelligence, and Kenneth Peterson (Harvard Business School Library) for support in acquiring data. We thank Pablo A. Picardo, Bashudha Dhamala, Raúl Gerardo Reyes, Gede Virananda, and Kuitai Wang for excellent research assistance. All errors are on our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- World trade grew steadily in the four decades before the 2008 global financial crisis. In the 1990s, the ratio of trade in goods and...