China is embedded in U.S. supply chains despite restrictions

China is still an integral part of US supply chains, even as US companies are taking steps to reduce direct imports from the Asian country, according to research presented during the annual “Jackson Hole” symposium held by the Federal Reserve Bank of Kansas City on Saturday.

The authors of the research, Laura Alvaro from Harvard Business School, and Davin Chor from the school of “touch School of business” at Dartmouth College, observed a decrease in the share of U.S. imports from China in exchange for an increase in the share of U.S. imports from Vietnam and Mexico between 2017 and 2022.

This shift was driven by US government policies, including tariffs, aimed at disengaging the US and Chinese economies.
It seems that Chinese companies have found ways to mitigate the impact of this, namely by increasing exports and foreign direct investment with Vietnam and Mexico.
“The indirect supply chain links of the United States with China remain intact; these links have been characterized by some dimensions – through China’s economic relations with Vietnam and Mexico – that they have been indirectly intensified,”Alvaro and Chor wrote in the research.

“Although the United States may reallocate its sources and imports, it may still be linked to China realistically, relying on it through third countries, including Vietnam and Mexico,”the researchers added.