Decoupling industrial and supply chains is not the solution

Editor's note: The article is written by Professor Yang Hangjun, vice dean of the School of International Trade and Economics at the University of International Business and Economics. The article reflects the author's opinions and not necessarily the views of CGTN.

Recently, former United States President Donald Trump was re-elected, which has sparked global concerns that he would bring back trade protectionist policies. The market consensus is that Trump's administration may impose high tariffs on certain imports from China. In response, US importers are speeding up purchases from China ahead of Trump's inauguration in January, to mitigate the risks of potential cost increases. This scenario has once again drawn extensive attention and caution toward the strategy of "decoupling and cutting off industrial and supply chains" and its far-reaching influence on China-US economic and trade relations, as well as the global economy.

Since Trump's first term, the US has implemented a host of trade protection measures, including "decoupling" in trade and supply chains to reduce its reliance on Chinese goods. It has also pursued "decoupling" in high-tech sectors to weaken China's international competitiveness in high-tech industries. However, these measures have failed to achieve their intended goals. On the contrary, high tariffs have significantly increased the costs of imported goods and raw materials in the US, exacerbating burdens on American companies and driving up living costs for ordinary Americans. Moody's has estimated that as of 2024, 92 percent of the costs of the tariff hikes targeting China have fallen on US consumers, while average American household expenditure has seen annual increases by on average $1,300. The short-term surge in imports from China ahead of Trump's return to office reflects a direct response to the uncertainty in future trade policies. This preemptive action underscores US companies' deep concerns over potential supply chain disruptions, further highlighting the high cost of decoupling industrial chain in this era of globalization.

"Decoupling and cutting off industrial and supply chains" would not only cause short-term shocks for both China and the US but also have negative repercussions for the global economy over the long term. The complexity and interdependence of supply chains make it nearly impossible for a single country to establish a complete production and sales system on its own. Attempting to sever such connections does little to enhance "national security". Instead, it may intensify inflationary pressures and hinder the global innovation process. The supply chain disruptions seen in the past few years in fields such as semiconductors and commercial aviation have vividly illustrated the nasty results of this strategy. In particular, amid the dual challenges of geopolitical tensions and climate change, the world calls for closer collaboration in response to future uncertainties. Whether addressing the climate crisis, improving energy structures, or advancing digital economic development, countries must opt for closer collaboration rather than isolation or confrontation in global supply and industrial chains.

From November 26 to 30, the Second China International Supply Chain Expo (CISCE) is being hosted in Beijing. Themed "Connecting the World for a Shared Future" and following the principles of "joint contribution, extensive promotion, and shared benefits", the expo has seen the participation of more than 600 domestic and international companies from more than 100 countries and regions. As the world's first national-level exhibition focusing on the supply chain, CISCE continues to set the pace for industrial development. By gathering companies and experts from around the world to discuss supply chain development strategies, CISCE not only provides an important platform for China-US economic and trade cooperation but also demonstrates the potential to replace "decoupling and cutting off industrial and supply chains" with mutually beneficial collaboration. In particular, against the backdrop of daunting challenges in China-US relations, CISCE stresses the importance and irreplaceability of supply chain collaboration and promotes complementary cooperation along the industrial chain. In this way, it helps mitigate the impact of "decoupling and cutting off industrial and supply chains" on the economies of both countries, stabilizing the global economy, and showcasing a feasible path of mutually beneficial development.