The $23.6 trillion bill for the West to reduce its dependence on China.

The ambition of the United States and Europe to reduce their structural dependence on China in strategic sectors comes at such a monumental price that, according to a new economic analysis, it borders on the improbable.

A study by the consulting firm EY-Parthenon, released on Monday, July 13, estimates that to rebuild entire production chains—from manufacturing to technology, including research, infrastructure, and logistics—outside of Chinese influence, Western economies would need to invest an additional US$23.6 trillion over the next 25 years.

The amount, distributed between the US, the eurozone and the UK, not only exceeds entire annual budgets but would also require a profound reconfiguration of the West's industrial and fiscal priorities.

The cost is so high that, even in a scenario of coordinated effort, the process would not eliminate Chinese dependence in the short term, given the country's dominant position in critical materials, industrial inputs, and processing technologies.

According to EY-Parthenon, replicating the productive infrastructure currently concentrated in China would cost the US $13.7 trillion by 2050; the eurozone $9.1 trillion; and the UK $800 billion.

For Americans, this would mean investing around US$550 billion per year — a figure comparable to the US$600 billion that tech giants plan to invest in data centers by 2026. In the European case, the required effort would be equivalent to almost doubling the European Union 's annual budget.

The scale of the challenge, analysts say, lies not only in the financial volume, but in the need to add this amount to investments already planned in energy, defense, infrastructure, and innovation.

“Localizing supply chains without imposing prohibitive costs on taxpayers and consumers will be one of the most formidable challenges for businesses and governments in the coming years,” Mats Persson, former advisor to the British government and currently at EY-Parthenon, told the Financial Times , which exclusively published the study.

The urgency of this move became evident last year when China imposed export controls on essential rare earth metals in response to US President Donald Trump's threat to impose 145% tariffs on Chinese imports.

The immediate reaction was a near freeze on automotive production lines in the US and Europe, until the two governments agreed to a truce. The episode exposed Western vulnerability to China's ability to use its dominant position as an instrument of geopolitical pressure.

According to the International Energy Agency, China is expected to supply more than 60% of the world's refined lithium and cobalt by 2035, as well as about 80% of battery-grade graphite and rare earth elements — essential inputs for the global energy transition.

"Even with massive investments, the West would not be able to quickly decouple from China, because the Chinese government controls critical stages of processing minerals, active pharmaceutical ingredients, and other essential industrial materials," warns Alicia García-Herrero, chief economist for Asia-Pacific at Natixis bank. The challenge, she says, is not just financial: it is structural.

Chinese dependence also translates into prices. Products manufactured in China often have a cost advantage of between 20% and 100% compared to their Western competitors.

EY-Parthenon estimates that reducing this dependence would raise prices and put pressure on inflation. In Europe, critical sectors could register increases of 1% to 2.5%, keeping the European Central Bank and the Bank of England above their 2% inflation targets for an extended period.

In addition to rebuilding factories and infrastructure, the West would have to invest heavily in worker training and industrial automation to offset higher costs.

Given this scenario, Persson believes that a "partial decoupling" is more realistic: companies would need to be selective in allocating resources, strengthening vulnerable points without trying to fully replicate the Chinese production ecosystem.

"Decoupling"

The discussion about so-called decoupling is not new. In 2025, the World Trade Organization concluded that a complete trade decoupling between the US and China would reduce global GDP by 7% in the long term. The greater risk would be the fragmentation of the trading system into two blocs: countries aligned with the US and countries aligned with China.

In this arrangement, there would be no winners—only losses distributed unevenly. The US economy represents 26% of the world's total, while China is responsible for 34% of global exports of manufactured goods.

The fragmentation of the global financial system, in turn, is already noticeable.

A recent report from the World Economic Forum, prepared with the consulting firm Oliver Wyman, estimates that the annual cost of this process to the global economy ranges between US$213 billion and US$307 billion, equivalent to the GDP of countries like Chile or Finland. Furthermore, it adds 0.2 to 0.3 percentage points to global inflation.

The study divides the world into three blocs: the West (USA, EU, Canada, United Kingdom, Japan, South Korea and Australia), the East (China and Russia) and a neutral group that includes Brazil, India, Indonesia, Mexico, Taiwan and Türkiye.

The effects of fragmentation are multiple: high tariffs increase the cost of trade and redirect flows to less efficient routes; regulatory barriers restrict investment and increase the cost of capital.

Uncertainty prevents companies from planning international operations, leading to reduced investment and jobs. Furthermore, supply chains become redundant, with corporations maintaining multiple suppliers in different regions to avoid disruptions. Together, these factors create a scenario where the cost of moving away from China is as high as the cost of remaining dependent on it.

The West, therefore, faces a complex equation: rebuilding its industrial autonomy would require trillions of dollars, decades of effort, and a profound reorganization of its economies—all without any guarantee of complete success, since China continues to hold structural advantages that are difficult to replicate.