The $23.6 Trillion Price of Decoupling: What the EY-Parthenon Study Reveals About Cutting Ties with China

The burden is distributed unevenly:

• United States: $13.7 trillion (roughly $550 billion per year)
• Eurozone: $9.1 trillion
• United Kingdom: $800 billion

To put the US figure in perspective, it is roughly equivalent to passing an Inflation Reduction Act every year for 25 years . For the EU, the annual cost would nearly double the bloc's entire budget .

Inflationary Risks from Reshoring Production

A central finding of the analysis is that the decoupling process itself would create persistent upward pressure on prices. The study warns that inflation could rise by as much as 2.5 percentage points in certain scenarios, driven by significantly higher manufacturing costs as production is moved out of lower-cost Chinese supply chains .

The report notes that in Europe, if reliance on Chinese supply chains is sharply reduced, key industry product prices could rise by 1% to 2.5%. According to the analysis, this could make it structurally harder for the European Central Bank and the Bank of England to achieve their 2% inflation targets .

Full Decoupling vs. "De-risking"

The EY-Parthenon study explicitly contrasts two policy approaches that are often conflated :

Full decoupling is a complete, hard break from Chinese supply chains. The $23.6 trillion figure represents this extreme scenario, requiring duplication of every element — infrastructure, R&D, software, manufacturing, and logistics — from scratch.

"De-risking" is a more targeted strategy favored by European leaders and reflected in the EU's official posture. It aims to reduce dependencies only in a narrow set of strategic sectors rather than sever all economic ties. As documented in a 2024 European Parliament study, European policymakers have consistently argued for "de-risking, not decoupling" . The EY-Parthenon analysis implies de-risking would carry substantially lower costs, though the report focuses on the full-decoupling scenario to quantify the extreme end of the risk spectrum .

The Four Most Exposed Sectors

The EY-Parthenon analysis identifies four sectors that would bear the heaviest costs from supply chain replication :

• Pharmaceuticals — heavy dependence on Chinese active pharmaceutical ingredients (APIs)
• Semiconductors — concentrated chip fabrication and materials supply in China/Taiwan
• Clean energy — solar panels, batteries, and wind turbine components, where China dominates global production
• Critical minerals — rare earths, lithium, and cobalt processing, where China controls an estimated 60–90% of global refining capacity

A separate analysis by the U.S. Chamber of Commerce also flags these same sectors, alongside ICT and cloud technologies and defense-related tech, as the most vulnerable to supply chain disruption . The European Commission and the U.S. have both identified semiconductors, pharmaceuticals, batteries, and critical materials as strategic sectors with highly concentrated supply chains .

Broader Context: Existing Western Measures

The EY-Parthenon study arrives amid an already active landscape of Western efforts to reduce dependencies.

U.S. critical mineral and semiconductor spending: The U.S. has committed roughly $30 billion through the Inflation Reduction Act and the CHIPS Act toward domestic critical mineral processing, battery supply chains, and semiconductor manufacturing .

EU trade defense actions: In a separate but related trade action, the EU has opened a new anti-dumping investigation into Chinese duck imports, reflecting the broader pattern of Western economies using trade defense tools to manage import dependencies from China . The EU has also imposed anti-dumping duties on Chinese solar panels, electric bicycles, and electric vehicles in recent years .

Transatlantic cooperation: In April 2026, the U.S. and EU reached a deal on critical minerals specifically designed to weaken China's grip on the supply chain . A Swedish Defence Research Agency report highlights that the EU has considerable import dependency on China for critical raw materials used in semiconductors and green technology, making it severely vulnerable to trade flow manipulation .

The Underlying Driver: China's Supply Chain Dominance

The sheer scale of the estimated cost is driven by the depth of China's integration into global supply chains. China is the world's largest manufacturer, top exporter, and dominant processor of critical raw materials. The European Central Bank has separately noted that the number of vital inputs under export restrictions has risen fivefold since 2009 .

A German central bank analysis previously found that a "cold turkey" separation from China could cause German welfare losses of more than 5% in the short run and approximately 1.5% in the long run . The ECB has also noted that the costs of decoupling are roughly five times higher in the short run compared to the long run, with consumer price increases affecting most countries .

Summary

The EY-Parthenon study puts a stark and detailed price tag on full decoupling: $23.6 trillion over 25 years, with $13.7 trillion for the U.S. alone. It flags a 2.5 percentage point inflation risk and identifies pharmaceuticals, semiconductors, clean energy, and critical minerals as the sectors most exposed. While the full-decoupling figure is eye-watering, European leaders continue to prefer a narrower "de-risking" path, and the U.S. and EU have already begun spending and imposing trade defenses in these same sectors.