Opinion | Why economic decoupling to contain or punish China is doomed to fail

Reconfiguring supply chains away from one market or another is part of a longer-term trend underpinned by textbook forces of supply and demand, and the need for companies to hedge risks. This makes for dull reading, as it lacks conflict and does not portend an unprecedented or hugely disruptive unravelling of the global order, and thus life as we know it, so commentators barely bother to wade into the details.

But as big Asian economies developed their own large consumer classes, multinational companies have moved production closer to these customers. Wages in China have also steadily risen, undercutting its attractiveness as a low-cost manufacturing base.

Trump’s trade war and the impact of Covid-19 shutdowns have accelerated these trends, making it easier to present them as part of a new cold war.

Trump’s trade war put political risk front and centre for strategic sourcing decisions, while Covid-19 showed how China had become the sole or major source of supply for many critical inputs, exposing supply chain vulnerabilities that nobody had given much thought to during the decades-long drive to maximise efficiency.

To separate long-term economic trends from short-term political posturing, business leaders and politicians need to consider three questions. First, what risks or vulnerabilities need to be addressed through supply-chain reconfiguration?