EY-Parthenon warns that a full decoupling of the United States from China could cost the global economy $14 trillion. The consulting firm’s analysis, released this week, outlines how severing economic ties between the world’s two largest economies would reshape supply chains, drive up operational costs, and accelerate innovation in digital currencies and infrastructure.
The $14 Trillion Price Tag
The figure is staggering. EY-Parthenon’s report estimates the cumulative loss over a decade if the two economies completely disentangle. That’s roughly the combined GDP of Japan, Germany, and the United Kingdom. The warning comes as policymakers in Washington and Beijing continue to escalate tariffs, export controls, and investment restrictions.
Supply Chain Shake-Up
Decoupling would force companies to rebuild supply lines that have taken decades to perfect. The report says global supply chains would be fundamentally restructured. Manufacturers that rely on Chinese components or assembly would need to find new sources or relocate production. That kind of shift doesn’t happen overnight, and the disruption would ripple through industries from electronics to pharmaceuticals.
Rising Operational Costs
Businesses would face higher costs across the board. EY-Parthenon points to more expensive logistics, duplicate manufacturing capacity, and the expense of navigating two separate regulatory systems. Smaller firms, in particular, would struggle to absorb those added expenses. The report doesn’t give a precise dollar figure for per-company costs, but the aggregate impact feeds into that $14 trillion estimate.
Digital Innovation as a Byproduct
Not all effects are negative, according to the report. Decoupling could spur innovation in digital currencies and infrastructure. As trade and investment ties fray, both the US and China may invest heavily in alternative payment systems and digital financial networks. The report notes that such moves could eventually lead to faster, cheaper cross-border transactions, but warns that the transition would be messy and uneven.
EY-Parthenon’s analysis does not predict a specific timeline for the $14 trillion loss. It presents a scenario based on current trends—and the trends are accelerating. The next major test of the relationship comes later this year, when the US Treasury is expected to review its sanctions policy toward China. That review could either deepen the decoupling or open a path back toward cooperation.
