China Still Embedded in US Supply Chains: The Jackson Hole Paper

China Still Embedded in US Supply Chains: The Jackson Hole Paper

(Bloomberg) — China remains an integral part of US supply chains even as American companies take steps to reduce direct imports from the Asian country, according to a paper presented at the Federal Reserve’s annual Jackson Hole conference in Kansas City on Saturday.

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The study authors, Laura Alfaro of Harvard Business School and Davin Chor of the Tuck School of Business at Dartmouth College, documented a decrease in the share of US imports from China and a corresponding increase in the share of US imports from Vietnam and Mexico between 2017 and 2022. .

This shift was driven by US government policies, including tariffs, that were intended to separate the US and Chinese economies.

Read more: Global trade data begins to show early signs of ‘re-globalization’

But Chinese companies seem to be finding ways to mitigate the impact, particularly by increasing exports to and foreign direct investment in Vietnam and Mexico.

Indirect supply chain links between the United States and China remain intact; “Along some dimensions – through China’s economic relations with Vietnam and Mexico – these indirect links have intensified,” Alfaro and Chor wrote.

Although the United States may reallocate its sources and imports toward Vietnam and Mexico, it may in fact remain linked to and dependent on China through third countries, including through Vietnam and Mexico.

Read more: China now sells less goods to the US than Mexico or Canada

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