Working Paper: CEPR ID: DP18457
Authors: Laura Alfaro; Davin Chor
Abstract: 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.
Keywords: Global Value Chains; Offshoring; Foreign Direct Investment; Unit Values; Upstreamness; Deglobalization
JEL Codes: E3; F1; F2; F52; F6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. government policies (tariffs) (F13) | decrease in U.S. sourcing from China (F69) |
| decrease in U.S. sourcing from China (F69) | increase in market share for Vietnam and Mexico (F69) |
| U.S. government policies (tariffs) (F13) | shifts in sourcing patterns (F61) |
| declines in China's share of U.S. imports (F14) | increases in imports from Vietnam and Mexico (F10) |
| rising unit values of imports from Vietnam and Mexico (F14) | increased costs (J32) |
| U.S. government policies (tariffs) (F13) | reshoring of production stages (L23) |