Have you heard the latest buzz about the West trying to break up with China’s economy? Well, a new report just dropped a jaw-dropping number that puts the whole “decoupling” drama into perspective.
According to a study by EY-Parthenon, if the US, the Eurozone, and the UK really want to cut their supply chain ties with China by 2050, they’re looking at a bill of a whopping $23.6 trillion over the next 25 years. That’s about $940 billion in new investments every single year. And here’s the kicker: even with all that cash, experts say it’s still nearly impossible to fully ditch China’s industrial might anytime soon.
So, who’s paying what? The US would need to shell out an extra $13.7 trillion, the Eurozone $9.1 trillion, and the UK around $800 billion. This money would go toward rebuilding everything from factories and R&D to software and supply chains that currently depend on China.
For the US alone, that means an extra $550 billion a year. To put that in perspective, that’s almost as much as what big US tech companies plan to spend on data centers in 2025.
But the EU might have it even tougher. The study suggests that for Europe to hit the same goal, its annual new spending would be about the same as doubling its entire budget.
A display of rare earth materials at a national museum exhibition in China, showcasing the country’s manufacturing prowess.
Mats Persson, a partner at EY-Parthenon and a former advisor to the UK Prime Minister, called this one of the “toughest challenges” for governments and companies in the coming years. The tricky part? Doing it without making taxpayers and consumers foot an impossible bill.
While the $940 billion annual investment is theoretically possible, the study warns it’s on top of what’s already needed for energy transition, tech R&D, defense, and infrastructure. And as supply chains get rebuilt, the costs will only climb higher.
This whole “de-risking” frenzy got a real jolt last year when China, pushing back against US trade bullying, slapped controls on rare earth exports. That move nearly brought the auto supply chains in the US and Europe to a halt. It was a wake-up call that made Western policymakers speed up their “de-risking” plans, like the EU’s push to build strategic reserves for key raw materials.
But here’s the thing: reality is way messier than political slogans.
The International Energy Agency (IEA) predicts that by 2035, China will still supply over 60% of the world’s refined lithium and cobalt, and about 80% of battery-grade graphite and rare earths. These are the critical building blocks for EVs, batteries, and the entire green energy transition.
Alicia García-Herrero, chief economist for Asia Pacific at Natixis, sums it up perfectly: even if the West throws crazy money at this, a true decoupling from China in the short term is just not realistic. The problem isn’t just the cash. China has a deep, unshakeable industrial base in key areas like rare earth processing and pharmaceutical ingredients. You can’t just buy your way into replacing that overnight.
And wait, there’s more bad news. The study says shifting supply chains will actually make things more expensive. Chinese-made goods are often 20% to 100% cheaper than similar products from the West. If Europe and the US switch to local manufacturing or other countries, prices will jump, fueling inflation.
In Europe, for example, dramatically cutting reliance on China could push up prices for key industrial products by 1% to 2.5%. The report even suggests this could make it super hard for the European Central Bank and the Bank of England to hit their 2% inflation targets.
Building new factories isn’t the whole story, either. To truly replace China’s manufacturing ecosystem, the West would also need to pour huge resources into training workers, boosting the talent pool, and going all-in on automation to close the gap in labor costs and efficiency.
Given these insane costs, Persson believes the West will likely go for “partial decoupling” instead of a full-blown breakup. Companies will have to be super strategic, focusing their limited cash on a few critical areas where supply chain risks are highest, rather than trying to replicate China’s entire industrial system.
This study really drives home a tough truth: after decades of development, China has built a complete industrial system, mature manufacturing skills, and massive economies of scale that can’t be copied with just a big checkbook. Even spending tens of trillions of dollars, building an alternative to China’s supply chain will be a long, expensive slog.
China has a simple answer to all this “de-risking” talk. More and more European companies are actually doubling down on their business in China. As a Chinese spokesperson put it, that’s the best response to the “de-risking” narrative. The trade between China and Europe is built on shared interests, comparative advantages, and fair competition. Complementary strengths are not a risk, and integrated interests are not a threat.
Over the past 50-plus years, trade between China and Europe has exploded by more than 300 times, with two-way investments nearing $260 billion. That’s proof that cooperation is strong and the future is bright. Trade protectionism just doesn’t work; it hurts everyone. The hope is that Europe will take a clear-eyed view of its economic ties with China, work together to solve problems, and grow the pie for mutual benefit.