Globalization Under Pressure: Trade Friction, Supply Chain Restructuring, and the Return of Industrial Policy
The postwar multilateral free trade system (GATT, later WTO) drove decades of global trade growth. Since 2016, trade protectionism and strategic competition have challenged this order: US tariffs on Chinese goods (Trump’s Section 301 tariffs, broadly continued and expanded under Biden); EU tariffs on Chinese EVs (2024); China’s export license restrictions on rare earths and critical minerals.
Supply Chain Restructuring: De-risking and Nearshoring
COVID-19 exposed the fragility of highly concentrated global supply chains in 2020–2021 — medical supply, semiconductor, and auto parts shortages reminded governments that “efficient” global supply chains lack resilience against systemic shocks. Policy responses include: Friend-shoring (shifting supply chains to politically trusted allied countries); Near-shoring (moving production closer to consumer markets geographically); On-shoring (returning critical industry production domestically).
Taiwan’s concentration in global semiconductor production (TSMC produces 90%+ of the world’s most advanced chip capacity) has become the most-watched supply chain risk in geopolitics — the core motivation for the US CHIPS and Science Act (2022, ~$53B in subsidies for domestic chip manufacturing).
Industrial Policy’s Return
The EU Green Deal, US Inflation Reduction Act (IRA, $369B in clean energy subsidies), and China’s “Made in China 2025” all represent governments directly steering industrial development — in tension with WTO free trade rules, creating one of the current global trade system’s most significant structural tensions.
