The $23.5 Trillion Question Nobody Wants to Answer

The Financial Times, citing EY-Parthenon, estimates that reducing the economic dependence of the US and Europe on China would cost more than $23.5 trillion over the next 25 years. The US would need to commit roughly $13.7 trillion, the eurozone another $9.1 trillion and the UK around $800 billion. The bill covers rebuilding manufacturing, relocating supply chains, expanding processing capacity, establishing research facilities, replacing Chinese software and technologies and recreating industrial ecosystems that took decades to consolidate.

Those figures represent only the direct investment. Chinese factory prices remain between 20% and 100% lower than those in the West across many industries. Replacing that cost advantage inevitably means higher inflation, more expensive consumer goods and interest rates settling above the levels businesses became accustomed to during the globalization era.

The annual investment requirement approaches $940 billion. On paper, that amount looks manageable for economies of this size, but reality looks different. These expenditures arrive on top of growing defence budgets, ageing infrastructure, energy transition costs, demographic pressures and already stretched public finances. Governments will have to borrow more, raise taxes, cut spending elsewhere or accept larger deficits. None of those options comes without political consequences.

Even then, success remains uncertain. Natixis argues that full decoupling is unrealistic because China continues to dominate critical supply chains, from rare earth elements and pharmaceuticals to industrial components and processing capacity. The world's manufacturing system has become deeply interconnected, leaving very few sectors untouched by Chinese production.

The numbers themselves are fascinating. But one question remains - why did Western economies spend more than four decades deliberately relocating production to China, only to discover that undoing the decision could cost more than $23.5 trillion?

The answer matters far more than the estimate, because without understanding how this dependency was deliberately created, policymakers risk repeating the same mistake with the next strategic industry.