From Dependence to Resilience: U.S. Supply Chains Face Geopolitical Pressures

The 2021–2024 Quadrennial Supply Chain Review stresses the urgent need for businesses and policymakers to rethink supply chain strategies, especially within a complex geopolitical environment.

The U.S. National Economic Council and the National Security Council have published their 2021–2024 Quadrennial Supply Chain Review, a comprehensive assessment of the current state of U.S. supply chains. 

The report provides an extensive overview of the challenges facing U.S. supply chains in a complicated geopolitical environment. It explores the vulnerabilities of the nation’s reliance on foreign suppliers, particularly China, and outlines strategies to improve resilience.

China’s dominance in global supply chains is a significant focus of the report. Key industries, such as rare earth minerals, semiconductors, and medical devices, remain heavily dependent on Chinese imports. This exposes the U.S. economy to geopolitical and supply chain risks.

The report highlights several measures the U.S. government has implemented to reduce its reliance on China, such as tariff adjustments, investments in domestic manufacturing, export controls, and international collaborations to secure critical materials and technologies.

With China remaining the largest exporter to the U.S., complete disengagement is not feasible in the near term. Instead, the focus will be on creating targeted strategies to reduce vulnerabilities in high-risk sectors and strengthen U.S. supply chains.

Moreover, customs expertise will be critical to adapt to new trade realities. The report emphasizes the role of customs brokers in helping businesses navigate this complex transition, who can assist U.S. importers in identifying new trade partners, managing tariffs and compliance requirements, and staying ahead of regulatory changes. 

Geopolitical tensions disrupting supply chains

The report highlights how escalating geopolitical tensions pose significant risks to U.S. supply chains. The evolving dynamics between the U.S. and China, particularly regarding trade policies and economic influence, remain a focal point. 

The recent heightened tensions have led to new tariffs, export controls, and retaliatory measures that disrupt established trade flows, creating uncertainty for importers and manufacturers alike.

One of the most pressing concerns is the potential for supply chain disruptions resulting from geopolitical conflicts, such as trade wars, diplomatic standoffs, or military escalations. These tensions impact the availability of critical imports and influence global market stability and pricing. 

For example, China’s dominant position in industries such as rare earth minerals and semiconductors gives it considerable leverage in trade negotiations and export decisions.

Moreover, geopolitical events beyond U.S.-China relations, including Russia’s invasion of Ukraine and tensions in the Indo-Pacific region, add to the complexity. 

These developments have created ripple effects across global supply chains, from energy supplies to raw material sourcing.

China’s influence on critical industries

China’s dominance in global supply chains is particularly pronounced in industries that support the U.S. economy. Sectors like rare earth minerals, advanced batteries, and medical devices are areas where U.S. supply chains remain heavily reliant on Chinese imports.

For instance, between 2015 and 2018, the United States sourced more than 80% of its rare earth minerals from China, despite the fact that these materials are critical for clean energy and defense technologies.

Similarly, China’s outsized role in the global semiconductor market has raised alarms about the stability of U.S. supply chains and technology sectors.

The report warns that these dependencies leave the U.S. economy vulnerable to external shocks, including geopolitical tensions, export restrictions, and potential disruptions caused by natural disasters or global pandemics. 

“The stability of these supply chains is not guaranteed, especially as China leverages its market position to influence global trade dynamics,” the report notes.

Measures taken to reduce dependence on China

The U.S. government has implemented several measures aimed at reducing dependency on Chinese imports and strengthening U.S. supply chains. These include:

Tariff adjustments

The Biden administration has rolled out significant tariff increases on Chinese imports to protect U.S. industries from China’s state-driven practices. These include a 100% duty on electric vehicles (EVs), 50% on solar cells, and 25% on steel, aluminum, and key minerals. The tariffs took effect in September 2024, with additional duties on lithium-ion batteries expected in 2026.

Investment in domestic manufacturing

Significant investments have been made to encourage domestic production capabilities. The CHIPS and Science Act allocates substantial funding to improve U.S. semiconductor manufacturing, reduce reliance on Chinese imports, and strengthen U.S. supply chains.

Support for critical mineral production

To counter China’s dominance in the supply of critical minerals essential for clean energy technologies, the U.S. has taken steps to support domestic production. For instance, the Department of Energy offered a conditional loan of $755 million for a synthetic graphite factory in Chattanooga, Tennessee, which marks the first of its kind in North America. This facility will supply graphite for electric vehicle batteries.

Export controls on advanced technologies

The U.S. has implemented strengthened export controls to limit China’s access to advanced computing and semiconductor technologies. These measures are designed to restrict China’s ability to develop and manufacture advanced semiconductor technology, thereby protecting U.S. supply chains tied to national security.

International collaboration

The U.S. is strengthening international partnerships to reduce its dependence on China. For example, the Indo-Pacific Economic Framework offers a platform for collaborating with allies and creating more secure and transparent supply chains. Additionally, agreements with countries like Canada and Australia to source critical minerals are underway.

What this means for U.S. importers

Geopolitical tensions are unlikely to ease soon, making supply chain resilience a critical priority for U.S. importers. This presents an opportunity to rethink traditional models, diversify supplier bases, and invest in more sustainable trade practices.

The report emphasizes the importance of proactive planning and adaptability. Businesses must now map supply chain vulnerabilities, evaluate their reliance on Chinese imports, and identify alternative sources for critical materials. 

While transitioning to new suppliers may involve initial costs, it offers long-term benefits in mitigating risks and ensuring stability.

Customs expertise will also be vital in navigating this evolving landscape. Customs brokers can assist importers in managing tariffs, complying with regulatory changes, and securing alternative trade partners.

U.S. importers must look beyond short-term challenges and focus on building resilience for the long term. Moreover, they need to keep a close watch on geopolitical developments and potential regulatory changes that could impact trade flows.

Please reach out to one of our trade professionals to discuss the impact of the evolving supply chain landscape on your business.