The Economic Impacts of Supply Chain Fragmentation in Critical Minerals

Recent developments in geopolitical tensions have heightened concerns about strategic decoupling in global supply chains. Prior research has predominantly focused on macroeconomic impacts of comprehensive supply chain fragmentation, yet such extreme scenarios lack operational relevance. A more feasible scenario involves targeted decoupling in strategic sectors, such as the US restricting Chinese access to advanced technology industries, potentially triggering retaliatory measures in critical mineral supply chains. Even if supply chain fragmentation is limited to a few advanced industries and the critical minerals used in them, its economic impact is expected to be significant. Therefore, to accurately estimate the effects of recent global supply chain fragmentation, it is necessary to consider both a micro-economic approach at the item level and a macro-economic approach across the broader economy. In this study, we review previous literature using various methodologies and propose a method that integrates micro-economic and macro-economic approaches. Using the proposed methodology, we quantitatively estimate the economic impact under a scenario of fragmentation in critical minerals and draw policy implications. (the rest omitted)