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Economic costs of friend-shoring

Author

Listed:
  • Javorcik, Beata
  • Kitzmüller, Lucas
  • Schweiger, Helena
  • Yildirim, Muhammed

Abstract

Geo-political tensions and disruptions to global value chains have led policy makers to re-evaluate their approach to globalisation. Many countries are considering friend-shoring -- trading primarily with countries sharing similar values -- as a way of minimising exposure to weaponisation of trade and securing access to critical inputs. If followed through, this process has the potential to reverse global economic integration of recent decades. This paper estimates the economic costs of friend-shoring using a quantitative model incorporating inter-country inter-industry linkages. The results suggest that friend-shoring may lead to real GDP losses of up to 4.7% of GDP in some economies. Thus, although friend-shoring may provide insurance against extreme disruptions and increase the security of supply of vital inputs, it would come at a substantial cost.

Suggested Citation

  • Javorcik, Beata & Kitzmüller, Lucas & Schweiger, Helena & Yildirim, Muhammed, 2022. "Economic costs of friend-shoring," CEPR Discussion Papers 17764, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17764
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    2. Sorin Krammer, 2024. "Weaponizing globalization: a review of Henry Farrell and Abraham L. Newman’s Underground empire: how America weaponized the world economy," Journal of International Business Policy, Palgrave Macmillan, vol. 7(2), pages 247-251, June.
    3. Francesco Paolo Conteduca & Simona Giglioli & Claire Giordano & Michele Mancini & Ludovic Panon, 2025. "Trade fragmentation unveiled: five facts on the reconfiguration of global, US and EU trade," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 52(3), pages 535-557, September.
    4. Shane Byrne & Kenneth Devine & Michael King & Yvonne McCarthy & Christopher Palmer, 2023. "The Last Mile of Monetary Policy: Inattention, Reminders, and the Refinancing Channel," NBER Working Papers 31043, National Bureau of Economic Research, Inc.
    5. Bernhard Dachs & Robert Stehrer & Anna Wolfmayr, 2025. "Global value chains, technology sovereignty and the role of China in international knowledge diffusion," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 52(3), pages 753-773, September.
    6. de Lucio, Juan & Díaz-Mora, Carmen & Mínguez, Raúl & Minondo, Asier & Requena, Francisco, 2023. "Do firms react to supply chain disruptions?," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 902-916.
    7. Daragh Clancy & Donal Smith & Vilém Valenta, 2024. "The Macroeconomic Effects of Global Supply Chain Reorientation," International Journal of Central Banking, International Journal of Central Banking, vol. 20(2), pages 151-191, April.
    8. Jackson, Karen & Shepotylo, Oleksandr, 2024. "Political alliances and trade: Europe in a polarized world," European Journal of Political Economy, Elsevier, vol. 85(C).
    9. Aiyar, Shekhar & Malacrino, Davide & Presbitero, Andrea F., 2024. "Investing in friends: The role of geopolitical alignment in FDI flows," European Journal of Political Economy, Elsevier, vol. 83(C).
    10. Gopinath, Gita & Gourinchas, Pierre-Olivier & Presbitero, Andrea F. & Topalova, Petia, 2025. "Changing global linkages: A new Cold War?," Journal of International Economics, Elsevier, vol. 153(C).
    11. Alberto Prina Cerai, 2024. "Geography of control: a deep dive assessment on criticality and lithium supply chain," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 37(3), pages 499-546, September.
    12. Luis-Antonio López & Mateo Ortiz & Ángela García-Alaminos & María-Ángeles Cadarso, 2025. "Consequences of legislation-based reshoring for EU carbon emissions in global value chains," Journal of International Business Policy, Palgrave Macmillan, vol. 8(3), pages 298-318, September.

    More about this item

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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