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- US, Europe and UK will need to invest an extra $23.6 trillion in next 25 years to ‘break free’ from China; Why even then it may not work
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US, Europe and UK will need to invest an extra $23.6 trillion in next 25 years to ‘break free’ from China; Why even then it may not work
An analysis has claimed that if the West – the US, Europe and the UK – are to reduce their dependence on Chinese manufacturing, technology and supply chains, they will have to invest $23.6 trillion over and above what they plan to in the next 25 years. According to a report by consultancy EY-Parthenon (via The Financial Times), replicating the infrastructure, research, software, manufacturing and supply chains that the Western countries currently rely on China for would cost roughly $940 billion every single year until 2050.The report suggested the breakdown: the US would need to invest $13.7 trillion, the Eurozone $9.1 trillion, and the UK $800 billion to achieve anything close to genuine independence from Chinese supply chains.To put that in perspective, the annual investment required from the US government and American companies, which is around $550 billion a year, is roughly equivalent to the $600 billion that America’s biggest technology companies collectively invested in data centres in 2025 alone. In easier words, the US would need to sustain a tech-industry-scale investment effort every single year for a quarter of a century, just to replicate what China already provides. For the European Union, the numbers are equally overwhelming. The annual spending required would amount to nearly doubling the EU’s entire annual budget.“Localising supply chains without putting prohibitive costs on taxpayers and consumers will be one of the most formidable challenges for businesses and governments alike in coming years,” said Mats Persson, a former Downing Street adviser now at EY-Parthenon.
How these countries became so dependent on China
The dependence on China has been brought into focus in recent years when Beijing imposed export controls on critical rare earth metals last year in response to President Trump’s threat of 145% tariffs on Chinese imports. Production lines in the car industry on both sides of the Atlantic came close to a standstill before Washington and Beijing agreed a truce.The report says that the vulnerability goes far beyond rare earths. By 2035, China is projected to supply over 60% of the world’s refined lithium and cobalt, which is essential for electric vehicles and clean energy It is also said to supply roughly 80% of battery-grade graphite and rare earth elements, according to the International Energy Agency.
Why money alone cannot solve this problem
Even if these countries are willing and able to spend $23.6 trillion, there is a deeper problem: China can work to prevent decoupling from succeeding.“The challenge is not just how much it would cost, but about China’s ability to intervene to stop such decoupling because of its existing control over the supply of everything from rare earths processing to active pharmaceutical ingredients,” said Alicia García-Herrero, chief economist for Asia Pacific at investment bank Natixis.China’s manufacturing cost advantage is typically 20 to 100 percent cheaper than Western competitors at the factory level. This means that even a successful decoupling would come with significant inflation. Given the scale of the challenge, EY-Parthenon’s analysts stopped short of calling full decoupling achievable in any realistic timeframe. Instead, Persson said “partial decoupling”, which is identifying areas where investment is deployed to build resilience against the most critical Chinese chokepoints , is the more likely and more practical outcome.
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