Supply Chain Decoupling
How geopolitics is fragmenting the global supply chains that China built — and what replaces them.
The Fragmentation of China-Centric Supply Chains
For two decades, the global economy organized its manufacturing supply chains around China. The combination of low labor costs, excellent infrastructure, massive scale, and a comprehensive supplier ecosystem made China the default manufacturing location for products from iPhones to industrial equipment. By 2018, roughly one-third of all global manufacturing output originated in China.
Three shocks in rapid succession broke the confidence that had underpinned this concentration. The US-China trade war (2018-present) imposed tariffs and demonstrated that geopolitical risk was real. COVID-19 (2020-2021) exposed the fragility of just-in-time supply chains when Chinese factory shutdowns paralyzed global production. And the Russia-Ukraine war (2022-present) showed that economic interdependence does not prevent conflict and that sanctions can sever economic relationships overnight.