As the Trump administration takes action to reduce its reliance on China, economists warn the cost for Europe and the U.S. to decouple from the country would be astronomical, and in some ways, completely unrealistic.
A new EY-Parthenon analysis calculated that the U.S., Eurozone, and UK would need to collectively invest an additional $23.6 trillion over the next 25 years in order to effectively stop relying on China in highly exposed sectors. The U.S. alone would have to invest $13.7 trillion, more than half of that sum, which includes the costs to build infrastructure, as well as improve research and development, manufacturing, software, transportation networks, and workforce training.
President Donald Trump has intensified U.S. efforts to limit reliance on China, including a 10% import tax under Section 122, which expires later this month, as well as additional levies from 7.5% to 100% under Section 301, which allows for the implementation of tariffs for alleged unfair trade practices, such as forced labor. Those duties are on top of efforts that came before Trump’s second term to increase domestic manufacturing, such as former President Joe Biden’s CHIPS Act to spur America’s semiconductor chip industry.
