THE CHALLENGE is particularly visible in East-West supply chains. EY-Parthenon estimates that duplicating these supply chains would require $13.7 trillion in the US, $9.1 trillion in the Eurozone and $800 billion in the UK, to rebuild not only physical infrastructure, but also critical capabilities such as R&D, software, advanced manufacturing, transport networks, supplier ecosystems and workforce skills.

Sectors most reliant on Chinese inputs will be the most exposed, with manufacturing, mining, and power and utilities accounting for almost $13tn of the $23.6tn in required investment.

Decoupling, as with any major economic transition, would require a phased build-up of investment over time. In its early stages, capital requirements are likely to be relatively contained, allowing for a targeted focus on the most exposed sectors, value chains and critical nodes. However, as the transition progresses, the scale of investment needed to achieve full decoupling would increase materially.

The analysis raises important questions about how these costs will be absorbed. If governments fund the transition, deficits in the US, UK and Eurozone could increase by close to 1 percentage point of GDP annually through 2050. If shouldered by businesses, companies in sectors such as machinery, electronics and automotive could face a sharp increase in capital expenditure — in some cases up to twice current levels.

Tension

The findings underscore a growing tension at the heart of modern globalisation: while geopolitics and policy push businesses toward more localised operations, economic pressures and innovation continue to pull them toward global scale.

Mats Persson, UK macro and geostrategy leader, EY-Parthenon, said: “Geopolitics and economics are pulling in opposite directions, driving a more fragmented form of globalisation in which economic nationalism co-exists with continued trade. 

“Western economies are already managing capital‑intensive transitions across energy, technology, defence and infrastructure; adding full East‑West supply chain decoupling without clarity on who bears the cost risks proving unaffordable. A more realistic outcome is partial decoupling, requiring a more agile response from businesses.

“However, many businesses have not yet adjusted to this new reality — either investing too heavily in localisation where it is not required or continuing to rely on low-cost supply chains that lack resilience. Businesses need a clear understanding of macro risks and a disciplined, case-by-case approach to deciding which operations should be localised and which should remain global. That approach must be underpinned by robust scenario planning and the flexibility to adapt as conditions evolve.”

Beyond initial capital investment, the report highlights the ongoing cost pressures associated with large-scale localisation. Chinese manufacturers retain a significant cost advantage — with factory prices for certain components estimated to be 20% to 100% lower — driven by scale, supply chain density and operational efficiencies. As a result, even partial shifts away from established global networks could contribute to structurally higher inflation, with long-term price levels rising by an estimated 1 to 2 percentage points.

Mats Persson added: “These cost dynamics underline why a full-scale shift away from global supply chains is unlikely. Even partial decoupling risks locking in structurally higher prices, leaving consumers and taxpayers to absorb the trade‑offs. Businesses should instead prepare for a more uneven transition, where the balance between local and global varies by sector — building flexibility to preserve cost advantages where they matter, while strengthening resilience where it is most critical.”