**Washington D.C.**: As the United States solidifies its position as the world’s largest economy, emerging supply chain risks and changing trade relationships, particularly with China and Mexico, pose significant challenges for corporate leaders and influence U.S. foreign policy strategies through economic leverage.
As of 2025, the United States is recognised as the world’s largest economy, boasting a nominal GDP of approximately $30 trillion. While a significant portion of consumer expenditure is allocated to domestically produced goods and services, international trade remains a crucial aspect of the U.S. economy. In 2024, U.S. exports accounted for about 11% of the GDP, with imports contributing an additional 14%. These figures underscore the importance of supply chain risk as a primary concern for corporate leadership, particularly in light of findings from the 2025 Supply Chain Annual Risk Report.
The report highlights several threats to supply chains, including extreme weather events, cyberattacks, piracy, raw material shortages, and regulatory changes. The impact of extreme weather has been particularly noteworthy; from 2016 to 2024, extreme weather events reportedly cost U.S. businesses around $750 billion. Cyber threats have surged, with reported cyber incidents increasing from approximately 250,000 in 2016 to doubling by 2022, each incident costing businesses an average of $4.35 million. In contrast, piracy, which costs an estimated $9 billion annually, primarily affects a small number of shipping companies that dominate global trade.
The issue of raw materials is significant as well, with about 11% of U.S. manufacturing plants in 2024 identifying raw material shortages as a key hindrance to efficient capacity utilisation, according to the U.S. Census Bureau’s Quarterly Survey of Plant Capacity Utilization. Given that many risk factors are largely beyond a company’s control, businesses are increasingly focusing on risk management strategies that involve shifting supply chains to align with prevailing political climate and regulatory frameworks.
Historically, U.S. businesses have had to navigate a complex web of regulations, with about 430 federal agencies currently overseeing over one million regulations. Research suggests that as economic landscapes become more intertwined globally, U.S. politicians are more frequently using regulatory measures to advance foreign policy objectives.
The trade dynamic with China has been one prominent area of focus. In 2017, China was the largest trading partner for the United States, but the trade relationship has long been marked by a significant imbalance. By 2018, the U.S. trade deficit with China reached an unprecedented $418 billion. In an effort to address perceived unfair trading practices, the U.S. responded with a series of executive orders imposing tariffs ranging from 7% to 25% on nearly 6,000 categories of Chinese goods. Additionally, the privileges allowing tariff-free imports of low-value shipments are slated for termination. The U.S. Commerce Department has also enacted stringent measures to restrict imports of information and communications technology from China.
The repercussions of these measures are evident in the reduction of Chinese foreign direct investment in the U.S., which fell from nearly $50 billion between 2016 and 2022 to around $5 billion. The trend is particularly notable in the high technology sector, where multiple high-profile Chinese projects have faced scrutiny and restrictions under both the Trump and Biden administrations.
While U.S. sanctions have led to a 19% decline in trade with China from 2018 to 2024, reducing the trade deficit with China by approximately $130 billion, it remains debatable whether such supply chain constraints have shifted the production or export model within China. Analysts note that claims of intellectual property theft and forced technology transfers persist, with currency manipulation continuing to be a contentious issue.
The landscape has shifted further towards Mexico, which by the end of 2023 surpassed China as the U.S.’s largest trading partner, indicating a significant recalibration in trading relationships.
In the context of geopolitical tensions, the conflict in Ukraine has prompted the U.S. to impose stringent sanctions on Russia following its invasion in 2022. President Biden enacted Executive Order 14071 and Congress introduced the Countering America’s Adversaries Through Sanctions Act, restricting U.S. businesses from investing or trading with Russia. This includes prohibitions on U.S. banks conducting business with Russian financial institutions.
Despite the extensive nature of these sanctions, U.S. and Russian trade was historically minimal, amounting to only $40 billion annually before the conflict. As such, while the sanctions have led to a contraction of the Russian economy, they have not significantly altered the political landscape or influenced strategic decisions by Russian leadership. In contrast, Russian trade with China has grown by approximately $50 billion annually during this period.
The interplay of these factors illustrates a broader strategy within U.S. foreign policy that increasingly leverages supply chains as a tool of economic influence. Although short-term trade restrictions may not lead to immediate changes in governance or policy, the effects of these approaches on long-term economic stability remain unknown. Consequently, U.S. supply chain managers are encouraged to develop skills in lobbying and adaptability as the political landscape continues to evolve.
Source: Noah Wire Services
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