On October 17, the SAIS Foreign Policy Institute (FPI) hosted a book talk on the challenges faced by US and EU supply chains and a 10-step strategy to de-risk and shore up resilience in the West. FPI Fellow Dr. Niklas Swanström and Mrittika Guha Sarkar, co-authors of The US and EU, and the Emerging Supply Chain Network: Politics, Prospects, and Allies, outlined their research and subsequent strategy detailed in their new book.
“This book grew out of a sense of frustration and urgency [regarding] global supply chains evolving into intricate systems and going towards a vulnerable direction,” Sarkar said. That frustration and urgency is being felt by many American policymakers and allies who feel that President Trump’s beloved tariffs are the wrong strategy. This book provides a different path.
Swanström, Sarkar, and co-author Frederik Erixon, Director of the European Centre for International Political Economy (ECIPE), emphasize how the West’s dependence on China, particularly in rare earth and critical minerals, has created economic vulnerabilities that require a comprehensive policy overhaul. In 2022, 72% of rare earth imports into the US and 39.6% into the EU were from China. China maintains roughly 60% of the world’s semiconductor manufacturing capacity and 50-60% of all battery and electric vehicle production capacity.
China’s domination of these critical capabilities presents a serious policy crisis for the West, but “much of the problem is not with China or Russia, it is domestically,” Swanström said. The US and EU outsourced production, mining, manufacturing and other labor-intensive jobs which created regrettable dependencies.
American policymakers, starting with the Nixon administration, believed that integrating China into the global market would usher in both capitalist and democratic reforms. The former somewhat came true, but the latter never did. Over forty-plus years, a strong centralized Chinese government maintained power and propelled the country to economic superpower status while the West’s industrial base slowly eroded. Meanwhile, the gravitational pull of China’s economic orbit has diminished the influence of Western economies in fostering rules-based standards in governance and trade in China and the world.
However, this is not necessarily the fault of the Americans being naive. Dr. Swanström shared that when he first visited China in 1989, the bulk of China watchers, policymakers, and businesspeople saw innovation in China as a boon for global economies. Real concern began when Xi Jinping became the paramount leader in 2013. Shortly after, it became clear that the US and EU were losing ground in critical strategic sectors and China’s domestic and international actions were moving in an unfavorable direction for the West (take, for example, forced labor in Xinjiang or provocations in the South China Sea).
Today the West finds itself economically vulnerable, dependent on China for many goods and materials important to national security and the green energy transition. The ten solutions presented in the book do not seek to reverse forty years of enmeshment—or perform wholesale decoupling—but rather to reduce dependencies while working to bring China to the table as a responsible trading partner.
The authors’ recommendations begin with redefining economic trade relationships. They suggest that the US should forge a new trade alliance “designed to eliminate tariffs and reduce regulatory friction between the free-market democracies, diverting trade away from China.” Swanström points out that tariffs alone are more suitable for short-term pressures and do not spur new domestic infrastructure needed to shift supply chains. Instead, deeper trade agreements between allied nations are required to build resilience. Furthermore, constructively engaging beyond the traditional Western economic relationships is imperative—“India, Brazil, and South Africa must also be pursued, ensuring that countries outside the immediate sphere of Chinese influence have viable alternatives to trade with.”
The discussion also covered the need to significantly boost research and development collaboration between the US and EU, effectively creating a transatlantic DARPA. The broader aim of their recommendations is to realign global supply chains to support a stable world order while revitalizing domestic economies and limiting the geopolitical influence of China and Russia. Swanström shared that decoupling is not possible nor something to be sought, but the US and EU should reduce strategic dependencies.
The authors said their recommendations have been received warmly by many in Congress, but the changes are a matter of political will. Homeshoring and ally-shoring critical industries will be expensive and take decades, and the political will is lacking. Planning out several decades of strategic investment has always been difficult for Congress and usually falls to the Executive branch, which can experience radical change every four years.
Unlike Trump’s first tariff war, the Biden administration adopted a different strategy. Through initiatives like the CHIPS and Science Act, America’s new industrial policy provided substantial investments in public sector STEM research and domestic advanced manufacturing. This combatted China’s funding of state-owned enterprises and production subsidies unmatched by other nations. Now that Trump is back in the White House and has reignited a tariff-driven trade war with China, and potentially our north and south neighbors, the alternative methods in this book provide a better way for two main reasons. First, these strategies do not alienate our allies, they partner with them. Second, they are far less inflationary than tariffs, which immediately hike prices for American consumers.
The shock value of tariffs for deal-making, as is Trump’s specialty, isolates our allies, whom the United States needs to counter China’s economic or geopolitical influence. Instead, incorporating the recommendations outlined in this book would offer a comprehensive, long-term strategy to strengthen American and allied supply chains.
Edited By: Kripa Sridhar