It has been approximately six years since the U.S.-China technological competition began to intensify. It is now quite clear that the rules-based global trade system is in decline, and the second Trump administration is expected to further destabilize the system. This report aims to offer a more objective assessment of the ongoing changes in the global supply chain, predict future trends, and discuss policy implications.
The report begins by analyzing the factors driving shifts in U.S. trade policy. First, “China Shock”, which represents the disruption caused by globalization, is examined along with its economic and political implications. Second, the changes in the international order following the end of the Cold War is analyzed.
Next, the report quantitatively evaluates the shifts in the global supply chain caused by the U.S.-China trade war using bilateral trade data and Inter-Country Input-Output(ICIO) tables. It also examines technological advancements in key sub-sectors of semiconductors and secondary batteries, which are closely tied to geopolitical risks, using patent data. The report finds that while the share of U.S. imports from China has decreased, the reliance of major U.S. trading partners on Chinese supply chains has increased. Technological advancements that help mitigate geopolitical risks were identified in sectors like semiconductors(chiplets and advanced packaging) and secondary batteries (materials for cathodes and anodes).
Finally, the report investigates potential triggers for changes in the global trade order and inter-country conflicts, such as the re-election of President Trump and China’s overcapacity issue.
The key policy recommendations of the report are as follows: prepare for upcoming trade negotiations with President Trump, further diversify supply chains, strengthen policy coordination with major economies, and support technological development to reduce geopolitical risks.
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