MS_Multipolar World- Supply Chain Strain_20250217pdf
MS_Multipolar World- Supply Chain Strain_20250217pdf
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  1. M BluePaperGlobal Economic Thematic Multipolar World: Supply Chain StrainPolicymakers are pursuing trade barriers and supply chain realignment in the name of national and economic security. Our new database shows that the next phase of this evolution will cost more, take longer, and bring greater risk. Investors, corporates and sovereigns face a new cost-benefit calculus. Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. February 17, 2025 10:00 PM GMT
  2. M BluePaper2This report launches a new series on rewiring commerce for a Multipolar World, one of Morgan Stanley’s 4 Key Themes for 2025. We see these themes as an interconnected roadmap for investing over the long term. To dig deeper into our Multipolar World thesis, we invite you to listen to our limited podcast series.The pressure to rewire global commerce for a Multipolar World is building. The US’s ongoing exploration of tariff escalation and its implementation of fresh tariffs on China underscore the rising incentives for near and friendshoring, a trend we highlighted in A Practical Guide to a Multipolar World that is gaining momentum. We expect it to accelerate further as US policy uses tariffs and other trade barriers to reduce trade deficits while establishing control over products and technologies deemed critical to the nation's security. Our analytical framework and our new trade database (see The Trade Almanac) show that the low-hanging fruit of nearshoring has been harvested. To assess the path forward, we measure three key vectors of trade: (1) the complexity and (2) concentration of supply chains across the goods spectrum and (3) the geopolitical distance between trade partners. The vectors of trade suggest further rewiring of supply chains will take time to develop, introduce higher costs, and increase risk. A series of case studies, leveraging our trade database with over a million data points on country-, sector-, and product-level trade, frame some of the major challenges of supply chain reorientation: the US lacks manufacturing capacity; China continues to take market share; and Mexico lacks the necessary inputs, requiring greenfield rather than brownfield investment. Supply chain strain will be a persistent risk to P&Ls and balance sheets, while increasing sensitivity to growth and inflation at the macroeconomic level. We expect companies to push more costs to end consumers, given less capacity to absorb higher costs in margins; this will drive ever greater volume and price risk to corporate P&Ls. Further, the riskier investments associated with shifting complex supply chains move risk past the P&L and onto the balance sheet. Our equity strategists highlight stocks that areenablers of supply chain reorientation, given the tougher transition, and defenders of margin, which are firms with strong pricing power that can position themselves amidst supply chain strain. Just as multipolar and tariff risks are nuanced, so too are investment opportunities since progress in adjusting supply chains is highly differentiated across regions and within sectors. The market will instinctively avoid supply chain strain – e.g. favoring services over goods in the US – but investment opportunities can be found within supply chain exposed sectors. In the section on Investment Strategy & Supply Chain Strain, we use the enabler / defender framework to identify firms insulated from supply chain strain. For example, in the US, we highlight well positioned multi-industry and capital goods companies with pricing power as defenders of margin. And in Mexico, we highlight a mix of exporters and firms with high US capex as enablers. In Asia, beyond regional diversification favoring ASEAN and India as enabler markets, cap goods companies enabling localization stand out, as well as critical minerals firms. In Europe, it's about identifying global firms with "local-to-local" supply chains, given their ability to both defend and enable.
  3. M BluePaperMorgan Stanley Research3ContributorsMorgan Stanley & Co International plc (DIFC Branch)+Rajeev SibalSenior Global Economist+971 4 709-7201Rajeev.Sibal@morganstanley.comMorgan Stanley India Company Private Limited+Mayank Phadke, CFAEconomist+91 22 6995-2024Mayank.Phadke@morganstanley.comMorgan Stanley & Co. LLCSeth B CarpenterChief Global Economist+1 212 761-0370Seth.Carpenter@morganstanley.comMorgan Stanley & Co. LLCMichael D Zezas, CFAStrategist+1 212 761-8609Michael.Zezas@morganstanley.comMorgan Stanley México, Casa de Bolsa, S.A. de C.V.+Nikolaj LippmannEquity Strategist+1 212 761-2463Nikolaj.Lippmann@morganstanley.comMorgan Stanley & Co. LLCAndrew B PaukerEquity Strategist+1 212 761-1330Andrew.Pauker@morganstanley.comMorgan Stanley Asia (Singapore) Pte.+Daniel K BlakeEquity Strategist+65 6834-6597Daniel.Blake@morganstanley.comMorgan Stanley & Co. International plc+Marina ZavolockEquity Strategist+44 20 7425-2318Marina.Zavolock@morganstanley.comMorgan Stanley & Co. LLCNicholas Lentini, CFAEquity Strategist+1 212 761-5863Nick.Lentini@morganstanley.comMorgan Stanley & Co. LLCJuan P AyalaEquity Strategist+1 212 761-4797Juan.Ayala@morganstanley.comMorgan Stanley C.T.V.M. S.A.+Julia M Leao NogueiraResearch Associate+55 11 3048-6046Julia.Nogueira@morganstanley.comMorgan Stanley Asia (Singapore) Pte.+Kristal JiEquity Strategist+65 6834-6949Kristal.Ji@morganstanley.comMorgan Stanley Asia (Singapore) Pte.+Jonathan F GarnerEquity Strategist+65 6834-8172Jonathan.Garner@morganstanley.comMorgan Stanley Asia Limited+Laura WangEquity Strategist+852 2848-6853Laura.Wang@morganstanley.comMorgan Stanley & Co. International plc+Regiane YamanariEquity Strategist+44 20 7677-4652Regiane.Yamanari@morganstanley.comMorgan Stanley & Co. International plc+Matthew NguyenEquity Strategist+44 20 7677-0773Matthew.Nguyen@morganstanley.comMorgan Stanley Europe S.E., Madrid Branch+Javier Martinez de Olcoz CerdanEquity Analyst+34 9141-81289Javier.Martinez.Olcoz@morganstanley.comMorgan Stanley Asia Limited+Tim HsiaoEquity Analyst+852 2848-1982Tim.Hsiao@morganstanley.comMorgan Stanley & Co. International plc+Max R YatesEquity Analyst+44 20 7425-1917Max.Yates@morganstanley.comMorgan Stanley & Co. International plc+Joshua MillerResearch Associate+44 20 7425-2909Josh.P.Miller@morganstanley.comMorgan Stanley & Co. LLCAriana SalvatoreStrategistAriana.Salvatore@morganstanley.comMorgan Stanley & Co. LLCArunima SinhaGlobal Economist+1 212 761-4125Arunima.Sinha@morganstanley.com
  4. M BluePaper45Executive Summary5The Multipolar Transition Enters a New Phase7Vectors of Supply Chain Strain9Investment Strategy & Supply Chain Strain12Supply Chain Strain in Seven Charts14De-Risking Supply Chains Gets Harder14Revisiting a Multipolar World15The Facade of Nearshoring19Vectors of Supply Chain Strain: Complexity, Concentration, Geopolitical Distance29Economic Implications of Supply Chain Shifts37Supply Chain Case Studies37Case Study Insights39Product Complexity and Nearshoring: Diverging Paths for Electrical Machinery and IT Hardware in Mexico43European Electric Transformers and Capital Goods: The Challenges of Concentration47Asia Case Study: EVs and Geopolitical Distance50EU Autos: How China Is Navigating Tariffs53Investment Strategy & Supply Chain Strain59US Equities: Tariff Overhang Reinforces Our Preference for Services Industries75Mexican Equities: Nearshoring and the Potential Shift from Brownfield to Greenfield Supply Chain Development86Asia-Pacific Equities: Positioned for Multipolar Supply Chains93European Equities: Idiosyncratic Risks in the Most Geographically Diverse Equity Market Contents
  5. M BluePaperMorgan Stanley Research5Executive SummaryThe Multipolar Transition Enters a New PhaseThe policy choices of global governments are accelerating the shift to a multipolar world, which drives difficult supply chain decisions. Firms face slower, costlier, and riskier supply chain outlooks as they shift factors of production in reaction. Policies are designed to"de-risk" trade relationships, favoring security over economic efficiency – a clear departure from the post-World War II global trade paradigm. Policy directives give companies incentives to "nearshore" and "friendshore" supply chains for products deemed critical to national and economic security, with alignment across political parties and in public opinion surveys. Recent geopolitical developments – the Russia/Ukraine conflict, US/China trade tensions, the COVID-19 pandemic, to name a few – have exposed supply chain vulnerabilities and the risks of relying on geopolitically distant trading partners. In the US, policy continuity has now spanned multiple administrations, indicating that the multipolar theme is durable. Both Democratic and Republican administrations have deployed a mix of pull ("carrot") and push ("stick") factors. For example, tax incentives in the Inflation Reduction Act as well as the CHIPS & Science Act aim to "pull" investment over the medium term to enhance US productive capacities. On the "push" side, the Biden administration kept tariffs from the first Trump administration, and President Trump's tariff initiatives early in his second term underscore the multipolar acceleration. A Preface to Our Blue Paper on Supply Chain Strain Thematic work and collaboration are key pillars of Morgan Stanley Research. As a result, our Global Research Department has identified four key themes for 2025 that we expect to shape both short- and long-term investment decisions. These themes are: 1) Multipolar World, 2) Longevity, 3) Future of Energy and 4) AI Tech Diffusion (see here). Rewiring commerce for a 'multipolar world' returns to our list of key themes after a hiatus in 2024. We have been mapping multipolarity since 2019, and the transition we envisaged in our 2020 Blue Paper Investing for a Multipolar World seems now entrenched. With policy makers poised to further devolve globalization, we look at the implications for trade and investment.This report is a collaboration between our economics, strategy and equity teams, leveraging our global analysts to explore the next phase of the Multipolar World via our new trade database (see The Trade Almanac) and insights from analysis of trade trends at a country, sector and product level. The easy supply chain decisions have been madeThe first phase of nearshoring saw relatively basic factors of production move from geopolitically distant trading partners to closer partners. Early nearshoring successes, we argue, belie the true scale of the challenge because where supply chain shifts occurred, they tended to be narrow in scope and focused in sectors where local economies could absorb capacity more easily. Our trade database shows that the
  6. M BluePaper6underlying productive capacities of supply chains shifted far less than headline trade patterns indicate. We expect increased multipolar world pressures to broaden the scope of products that must be nearshored and increase efforts to ensure that productive capacities follow shifting trade patterns. The next phase of supply chain reorientation will involve (1) more complex products and (2) concentrated factors of production. At the same time (3), greater geopolitical distance will trigger more difficult and potentially quicker investment decisions about supply chain relocation – hence, supply chain strain. The data show that more complex goods tend to have more concentrated supply chains, often in geopolitically distant geographies.Fundamentally, China remains a top exporter in the majority of sectors and dominates a number of complex and concentrated product supply chains, while the US lacks the manufacturing capacity to easily absorb production. This poses a challenge for nearshoring, since shifting production of complex goods away from concentrated markets involves higher costs, longer lead times, and greater investment risk. Source: Morgan Stanley Research
  7. M BluePaperMorgan Stanley Research7Vectors of Supply Chain StrainThe three vectors of trade – complexity, concentration of production, and geopolitical distance – enable us to pinpoint supply chain strain at a sector and product level. Complexity indicates how easily a product can be replicated/produced locally and how much investment it takes to create the productive capacity. The complexity data show (a) how steady the top exporters of complex products have remained, (b) the long-run and continued rise of China, (c) and the long time horizons required for countries to improve their manufacturing capacity. Data on concentration of production, closely tied to complexity, highlight that highly concentrated supply chains usually have higher barriers to entry because of constraints from complexity, labor, and/or capital inputs. Despite the pressures to nearshore, the data show that many products remain highly concentrated. Geopolitical distance describes the policy proximity of two trading partners; greater distance indicates higher risk of trade disruption. A series of case studies exemplify how the vectors of trade manifest in supply chains. Armed with granular data from the trade database (see The Trade Almanac), we dig into key sectors to understand how trade patterns are and are not changing. In the Mexican case study comparing electrical machinery to IT hardware, we find that Mexico lags in productive capacity for more complex products because investment flows favor low-complexity production. European efforts to produce "locally" in the US have done little to overcome Asian market dominance in the electrical transformers case study. Despite considerable investment in US productive capacity, industry projections of US electric transformer demand imply that the US will remain dependent on Asian electrical transformer imports past 2030. Finally, in the autos case study, as China enhances its dominance in the EV space and gains market share in autos more broadly, western OEMs face difficult decisions on whether to overcome geopolitical distance by cooperating with or directly challenging Chinese automakers. RegionCase SectorTrade VectorCase Study CommentMexicoElectrical machinery, IT Hardware, AutosComplexityMexico lags in productive capacity for more complex IT hardware products relative to lower complexity electrical machinery. In fact, in a Morgan Stanley AlphaWise survey, firms affirmed this divergence indicating clear preference to invest in low complexity products over high complexity products in a Mexican supply chain context. EuropeElectrical Transformers, Capital GoodsConcentrationDespite an apparent shift in concentration of trade away from China/Asia, data shows production capacity is still concentrated in China/Asia. Mexican export growth data shows increases in Mexican exports to the US are closely tied to Mexican imports from China. Furthermore, European and American firms focusing investment in US productive capacities will still fall far short of future expected demand, suggesting import reliance will not end any time soon. EuropeAutomobilesGeopolitical DistanceChinese auto manufacturers continue to take market share where they have access to markets. Specific to EVs, western OEMs will require material investment or JVs to catch up technical capacity - both face barriers from geopolitical distance. AsiaAutos and EVsGeopolitical Distance
  8. M BluePaper8Economic Implications of Supply Chain ShiftsManufacturing in the US has declined as a contribution to GDP while the economy becomes more and more service oriented. As a result, data indicates that the capital stock in the US tied to manufacturing has steadily fallen since the 1990s. In fact, dependence on imported goods is highest in sectors traditionally tied to manufacturing. This affects the economics of supply chain restructuring; ironically, the US will likely first need to run a wider deficit to import capital goods equipment to rebuild manufacturing capacity before it can reduce broader dependence on imports in manufactured goods. Shifting supply chains affects prices and volumes like tariffs: prices rise and volumes fall, though the transmission process may be slower. The adjustment stems from friction costs in the shift to new markets: capital and labor inputs may not readily available, requiring more investment and initially less efficient microeconomic outcomes. For firms, this means greater P&L and balance sheet risk. Given these heightened risks and increased costs in the next phase of nearshoring, we expect greater microeconomic pass-through to prices and volumes.At the macroeconomic level, this implies that growth and inflation sensitivity will be higher in the next phase of nearshoring, increasing volume and price risk. Where an economy runs a trade surplus, the migration of factors of production may produce a growth shock. Conversely, where an economy runs a trade deficit, trade disruption can drive an inflation shock. Growth and inflation are clearly interrelated, but as we think about supply chain strain in the context of geopolitical pressure, trade balances increase in importance.Source: UN Comtrade, BEA, Federal Reserve, Morgan Stanley Research
  9. M BluePaperMorgan Stanley Research9Investment Strategy & Supply Chain Strain Higher sensitivity to prices and volumes translates to greater P&L and balance sheet risk at a firm level. For the P&L, higher costs associated with shifting factors of production can come from input costs or recognizing amortized investment costs over time. While in previous phases of nearshoring, margins absorbed some of these costs, firms indicate they now have less capacity and willingness to do so. In many sectors, the costs are simply too high to absorb. Firms thus face hard choices in balancing price versus volume for the top line, and deciding what operating margin level is sustainable on the bottom line. On the balance sheet, risks are higher not only because of the higher levels of investment, but also because of higher risk of investing in new productive capacity in economies that may lack the necessary capital and labor inputs. Investing amidst supply chain strain requires understanding channels of production – we highlight two kinds of companies: enablers of supply chain reorientation, given the accelerated pace of transition, and defenders of pricing and cost given the acute margin pressures. •Enablers are companies that facilitate the transition of supply chains either because they have already started shifting productive capacities or can provide inputs to help expand productive capacity in new markets. •Defenders are companies that retain pricing power or can manage cost pressures to defend margin amidst the upheaval. The line between enablers and defenders can shift, since some of today's defenders were first mover enablers, but the binding characteristic across both categories is insulation from supply chain strain. How this looks across sectors and within regions is highly specific to the relevant supply chain. It is difficult to be explicit at a country and firm level, however, because regions are at different stages of reorienting supply chains; Asian companies are more advanced in reorienting supply chains than US firms, with Europe and Mexico sitting in between, though closer to Asia than to the US. The differences across regions mean that an enabler in Asia is likely a firm that has already shifted supply chain capacity or, better yet, can take market share amidst supply chain strain; by contrast an enabler in North America is more likely a firm facilitating nearshoring capacity. Focusing on defenders, in Asia these are firms insulated from competition because of product complexity, while the focus in North America is more specific to tariff exposure and pricing power. Tariff risk adds a layer of complication because it affects the ability for enablers to enable and defenders to defend; our base case is that geopolitically proximate trade partners will have lower tariff barriers in the medium term than geopolitically distant trade partners. The section Investment Strategy & Supply Chain Strain details these nuances at a regional level, but at a global level, we align the enablers and defenders in the table below.
  10. M BluePaper10 Investing Amidst Supply Chain StrainRegionEnablersDefendersAsiaFirms that have already re-positioned supply chains or that can take market share amidst strainFirms that can defend pricing and market share because of product complexity / concentrationEuropeFirms with US supply chains providing local-to-local production Buyers of US products or insulated from US market Mexico / LatamFirms with NA capex / local production as well as providers to build productive capacityFirms that can defend pricing via a localized supply chainNorth AmericaFirms facilitating nearshoring or alternative solutions, such as equipment rentalMore insulated from tariffs, can defend pricing power and/or have domestic supply chainsOur preferred sectors in a world of supply chain strain driven by multipolar escalation and/or new tariffs vary by region – in some regions there are clear sector implications while in others it is about identifying relative opportunities within sectors. In the US, our Equity Strategy team prefersservices (Financials, Software, Media & Entertainment, and Consumer Services) over Consumer Goods at the broadest level. Though, among companies more exposed to the supply chain, they prefer enablers within machinery and cap goods where pricing power is also stronger. With supply chain diversification an established theme in Asia Pacific, beneficiaries' shares significantly outperformed those disadvantaged by supply chain diversification in 2024; four sectors (Aerospace & Defense, Capital Goods, Critical Minerals (including Nuclear) and China Localization) look especially well positioned. In LatAm, the nuance is very company specific within sectors and so we detail according to criteria linked to enablers and defenders. In Europe, we again focus within sectors and specifically on companies with local to local production capabilities in the US (these do not fit neatly into a uniform sector categorization). With less than 3% of MSCI Europe's weighted revenues exposed to direct tariffs, European equity risks are highly idiosyncratic. The companies in Exhibit 1 below have been selected by our equity strategists with input from our fundamental analysts and represent examples of firms that are well positioned to cope with supply chain strain, broadly fitting into the enabler and defender framework offered above.
  11. M BluePaperMorgan Stanley Research11Exhibit 1:Companies well situated in their industry and/or geography to cope with supply chain strain on a relative basis Ticker Company AnalystAnalyst RatingMarket Industry Group Last Price (LCU)028050 KPSamsung E&A Co Ltd Seok, JoonOWS. Korea Capital Goods18210GGBR4 BZGerdau S.A. De Alba, CarlosOWBrazil Materials17.74 TX UNTernium S.A. De Alba, CarlosOWMexico Materials29.82002371 CHNAURA Technology Group Co Ltd Wu, RayOWChina Semis & Equip414.66688012 CGAdvanced Micro-Fabrication Equipment Inc Chan, CharlieOWChina Semis & Equip196.93GLOB UNGlobant SA Medina, CesarOWArgentina Software and Svcs215.896954 JTFanuc Ibara, YoshinaoOWJapan Capital Goods45244063 JTShin-Etsu Chemical Watabe, TakatoOWJapan Materials4690RIL ISReliance Industries Maheshwari, MayankOWIndia Energy1216.55207940 KPSamsung Biologics Co Ltd Kim, Mi HyunOWS. Korea Pharmas, Biotech and LS1157000GCC* MMGCC, S.A.B. de C.V Obregon, AlejandraOWMexico Materials203.9ALFAA MMAlfa SAB de CV Alves, RicardoOWMexico Industrials17.4JBSS3 BZJBSAlves, RicardoOWMexico Consumer Staples34.62ALPEKA MMAlpekMontanari, BrunoEWMexico Materials14.76GRUMAB MMGruma SAB de CV Alves, RicardoEWMexico Consumer Staples356.51AC* MMArca Continental Alves, RicardoEWMexico Consumer Staples203.74KOFUBL MMCoca-Cola Femsa SAB de CV Alves, RicardoEWMexico Consumer Staples170.71STLAM IMStellantis Martinez de Olcoz Cerdan, JavierOWEurope Autos & Shared Mobility12.7448TRA GRTraton SE Kirunda, ShaqealEWUKAutos & Shared Mobility31.9VOLVB SSVolvoKirunda, Shaqeal OWSweden Autos & Shared Mobility317.3SIE GYSiemens Yates, MaxOWGermany Industrials211.6SPX LNSpirax Group PLC Yates, MaxOWUKIndustrials7820WEIR LNWeir Group PLC Harleaux, MichaelOWUKIndustrials2322RXL FPRexel S.A. Yates, MaxOWFrance Industrials25.99ABBN SEABBYates, MaxEWSwitzerland Industrials50.5SU FPSchneider Electric Yates, MaxEWFrance Industrials242.1BNZL LNBunzl PLC Vermeulen, AnneliesEWUKIndustrials3428FERG LNFerguson Enterprises Inc Vermeulen, AnneliesOWUK/US Industrials14610GLB LNGlanbia PLC Roux, DavidOWIreland Consumer Staples14.47MLM USMartin Marietta Materials Castillo, AngelOWUSMaterials529OSK USOshkosh Corp Castillo, AngelEWUSCapital Goods111.13URI USUnited Rentals Castillo, AngelEWUSCapital Goods752.99VMC USVulcan Materials Co Castillo, AngelEWUSMaterials267.77WSC USWillscot Holdings Corp Castillo, AngelOWUSCapital Goods37.91ETN USEaton Corp PLC Snyder, ChrisOWUSCapital Goods316.51FAST USFastenal Co Snyder, ChrisEWUSCapital Goods74.33HUBB USHubbel Inc Snyder, ChrisEWUSCapital Goods397.07ROK USRockwell Automation Inc Snyder, ChrisOWUSCapital Goods303.75TT USTrane Technologies PLC Snyder, ChrisOWUSCapital Goods364.77Source: Bloomberg, Morgan Stanley Research. Note includes EW and OW MS rated stocks only. Pricing as of 12 February, 2025
  12. M BluePaper12Supply Chain Strain in Seven ChartsExhibit 2:Trade growth between geopolitically distant trade partners declined notably between 2018-2023, but the level of trade between geopolitically distant partners remains elevated.0%2%4%6%8%10%2000-2010 2010-2018 2018-2023CAGR of Imports by Phase (%)Low Geopolitical DistanceModerate Geopolitical DistanceHigh Geopolitical DistanceTotal02000400060008000100002002 2005 2008 2011 2014 2017 2020 2023Imports from Partner (Bil USD)Low Geopolitical DistanceModerate Geopolitical DistanceHigh Geopolitical DistanceSources: Xia, D. and Yetman, J. (2024). Deconstructing Global Trade: The Role of Geopolitical Alignment. Bank of International Settlements Quarterly Review, September 2024. See also Bailey, M. A., Strezhnev, A., & Voeten, E. (2017). Estimating Dynamic State Preferences from United Nations Voting Data. The Journal of Conflict Resolution, 61(2), 430–456. http://www.jstor.org/stable/26363889, Voeten, Erik; Strezhnev, Anton; Bailey, Michael, 2009, "United Nations General Assembly Voting Data", https://doi.org/10.7910/DVN/LEJUQZ, Harvard Dataverse, V33, UN Comtrade, Morgan Stanley Research. Note: The thresholds for low and high geopolitical distance are 0.75 and 1.5 corresponding to Ideal Point Distance data based on the 78th Session of the United Nations (2023). Exhibit 3:China remains the leading exporter in most manufacturing linked product categories. 51872412130102030405060708090100Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Ranks 6-10 Not in Top 10China's Global Rank in Exports across HS2 Product CategoriesSource: UN Comtrade. Morgan Stanley Research. Note Data as of 2023. HS is the trade nomenclature for product categorization as per the world customs organization.Exhibit 4:The US still relies on China (red) for critical imports...0% 20% 40%60% 80%100%FuelsTransportationTextile and ApparelElectrical machinery and equip.Machinery and mechanical appl.MineralsMetalsAnimals and Food ProductsPlastic, Wood, Paper, Stone, etcMiscellaneousChemicalsConcentration of US Imports (China Share in Red)Rank 1Rank 2Rank 3Rank 4Rank 5Rest of WorldSource: UN Comtrade, Morgan Stanley Research. Note data as of 2023.
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