Decoupling from China would cost the West $23.6tn
Cutting Western reliance on China would carry a staggering price. A new EY-Parthenon study puts the cost of decoupling from China at $23.6tn over 25 years for the US, eurozone and UK, and warns the bill would fall hardest on the chips, batteries and data centres powering Europe’s tech future.
Key Takeaways:
- Cost Estimate: The study estimates that the US, eurozone, and UK would need to invest an extra $23.6tn over 25 years to end their reliance on China in critical industries.
- Uneven Distribution: The financial burden is not evenly distributed; the US bill is estimated at $13.7tn, the eurozone’s at $9.1tn, and the UK’s at $800bn by 2050.
- Annual Cost: This translates to roughly $940bn in extra spending every year, on top of existing commitments to energy, defense, and infrastructure. For the EU, this sum is close to doubling its entire budget.
- Industry Impact: The cost is comparable to the $600bn invested by large American tech companies in data centres in 2025 and nearly matches the scale of the AI build-out in the US.
- Critical Materials: China’s dominance lies in materials like refined lithium, cobalt, battery-grade graphite, and rare earths, which are essential for batteries, magnets, and semiconductors.
- Geopolitical Risks: Export controls by China, as seen with rare earth metals, pose significant risks to car production lines in the US and Europe.
The report argues that money alone is not enough; Beijing controls too many industrial inputs, making quick decoupling difficult.