The hidden supply chain costs of the AI boom

In this Decoder interview, Harvard Business School economist Willy Shih discusses his book "Where Does My Stuff Come From? The Powerful Economics Behind Global Supply Chains" and explains why global supply chains are organized around fundamental economic forces rather than policy preferences. He argues that tariffs and trade barriers typically prompt companies to circumvent them through "tariff engineering" and relocation rather than reshoring, citing examples like Chinese components flowing to Mexico for USMCA assembly. Shih contrasts China's long-term, technocratic industrial planning (such as the 863 Plan and five-year plans) with the US's transactional and unstable tariff environment, which deters long-term manufacturing investment. He contends the US should focus on high-productivity, highly differentiated manufacturing where it holds technological leads, and should build trade relationships with like-minded allies rather than pursuing a go-it-alone strategy. The conversation also touches on how AI's insatiable demand for memory chips and computing resources is straining supply chains, driving up prices, and represents a new kind of pressure distinct from trade policy disruptions.

(Source：The Verge)