2025供應(yīng)鏈融資研究報告：韌性、機(jī)遇與貿(mào)易風(fēng)向的轉(zhuǎn)變 Supply Chain Financing Resilience,Opportunity and the Shifting Winds of Trade

Ct

SupplyChainFinancing

Resilience,OpportunityandtheShiftingWindsofTrade

CitiGPS:GlobalPerspectives&SolutionsFebruary2025

Citiisoneoftheworld’slargestfinancialinstitutions,operatinginallmajorestablishedandemergingmarkets.Acrosstheseworldmarkets,ouremployeesconductanongoingmulti-disciplinaryconversation–accessinginformation,analyzingdata,developinginsights,andformulatingadvice.Asourpremierthoughtleadershipproduct,CitiGPSisdesignedtohelpourreadersnavigatetheglobaleconomy’smostdemandingchallengesandtoanticipatefuturethemesandtrendsinafast-changingandinterconnectedworld.CitiGPSaccessesthebestelementsofourglobalconversationandharveststhethoughtleadershipofawiderangeofseniorprofessionalsacrossourfirm.Thisisnotaresearchreportanddoesnotconstituteadviceoninvestmentsorasolicitationstobuyorsellanyfinancialinstruments.FormoreinformationonCitiGPS,pleasevisitourwebsiteat/citigps.

citiGPS:Globalperspectives&solutionsFebruary2025

ChrisCox

GlobalHeadofTradeandWorkingCapitalSolutions

CitiTreasuryandTradeSolutions

chris.cox@

ColeLanglois

SeniorAssociate,GlobalEconomicsCitiResearch

cole.langlois@

DevonStone

DataScientist

CitiGlobalDataInsights

devon.stone@

IanKervick-Jimenez

WorkingCapitalAdvisory

CitiTreasuryandTradeSolutions

ian.kervickjimenez@

SanjeevGanjoo

GlobalHeadTrade

ReceivableFinanceandCommercialBankTradeProducts

CitiTreasuryandTradeSolutions

sanjeev.ganjoo@

RichardHodder

GlobalHeadofExportAgencyFinance

CitiTreasuryandTradeSolutions

richard.hodder@

NathanSheets

GlobalChiefEconomistCitiResearch

nathan.sheets@

PaulineKontos

GlobalHeadofWorkingCapitalAdvisory

CitiTreasuryandTradeSolutions

pauline.kontos@

MichaelHauser

Consumer,Retail,&Healthcare

CitiCorporateBanking

michael.hauser@

ParvaizHamidHusenDalal

GlobalHeadof

PayablesFinance

CitiTreasuryandTradeSolutions

parvaiz.dalal@

BobPetrie

GlobalTrade

PartnershipsandInnovation

CitiTreasuryandTradeSolutions

bob.petrie@

GauriDuggal

GlobalTradePayablesFinance

CitiTreasuryandTradeSolutions

gauri.duggal@

RobertSockin

GlobalEconomistCitiResearch

robert.sockin@

HelenHKrause,CFA

HeadofDataScienceInsights

CitiGlobalDataInsights

helen.krause@

JenniferWainer

HeadofSustainability&ESG

CitiTreasuryandTradeSolutions

jennifer.wainer@

ErikRost

GlobalTradePayablesFinance

CitiTreasuryandTradeSolutions

erik.mason.rost@

JoaoPaulo(JP)Marchese

GlobalTrade

PartnershipsandInnovation

CitiTreasuryandTradeSolutions

joao.marchese@

3

February2025citiGPS:Globalperspectives&solutions

?2025Citigroup

ChrisCox

GlobalHeadofTradeandWorkingCapitalSolutions

CitiTreasuryandTradeSolutions

SUPPLYCHAINFINANCING

Resilience,OpportunityandtheShiftingWindsofTrade

Thewindsoftradearechanging.Thepandemic,geopoliticalupheavals,supplychaindisruptions,inflation,theendofhistoricallylowinterestrates,andotherchallengeshaveleftscarsoncompaniesofallsizes,inalljurisdictions.

ThisCitiGPSSupplyChainFinancingReportoffersacomprehensiveanalysisof

globaltradedynamics,economicperformance,andemergingtrendsinsupplychainmanagement.

Despitetheupheaval,theoverridingthemehasbeenresilience.Thelessonslearnedincludingafocusonworkingcapitalwillnotbeeasilyforgotten.

Yetoverthepasttwoyears,theglobaleconomyhasoutperformedbearish

forecasts,bolsteredbystrongconsumerspendingandahealthyU.S.corporatesector.Thegeopoliticallandscapeisunpredictable,ofcourse,withPresident

TrumpsreturntotheWhiteHouseintroducingtradeuncertaintiesthatcouldhavesignificantconsequencesforcompaniesandcountries.

Theoperatingenvironmentrightnowthough,weeksintothenewadministration,remainsfavorable,drivenbyratecutsintheWestandgovernmentstimulusinChina.Atthestartof2025,Citieconomistspredict2.6%growththisyear,withinflationarypressuresinglobalgoodsmarketsexpectedtoremainsubdued.

Thisyear,58%ofsupplierssurveyedreportedsalesordersmeetingorexceedingexpectations,while61%oflargecorporatesanticipateincreasedexports.

Keytothisoptimismistherealizationthatglobalizationisnotretreatingbut

evolving.Shiftsinsupplychainsreflectastrategicrealignmentaimedatmitigatingrisksandenhancingresiliencewhileachievingefficiencieswherepossible.

Diversificationeffortsareaccelerating,with38%ofcorporatesurveyrespondentsplanningtoreducerelianceonChina.Thisreconfigurationcreatesnew

opportunities.Overathirdofsuppliersarebenefitingfromnewsalescorridorsaftersecuringordersfrompreviouslyuntappedcountries.

Itwilltaketimetofullyunderstandanysupplychainreconfigurations,butsomecorridorscouldbenefit.ShouldcorporatesadoptmoreChina-plus-onestrategies,China-to-ASEANcorridorsmayseegrowth.TheAsia-Latamcorridoralsohas

potential.

GenerativeAIcouldstreamlinetrade:58%oflargecorporationsareincreasinginvestmentsindigitalinnovations.LargecorporateshopeGenAIcouldenhancetreasuryoperationsbyunlockingtrappedliquidityandenablingfaster,more

responsiveinventorymanagement.

Thisreportdeliversinsightsaboutglobaltrade,theeconomicoutlook,andthe

challengesandambitionsoflargecorporatesandsmallersuppliers.Wealso

explorethechangingroleofexportcreditagencies,aswellastrendsinpayablesandreceivablesfinanceanddigitization.

Wehopethisreportprovidesacomprehensiveperspectiveontheshiftingtradelandscapeandtheopportunitiesthatlieaheadforbusinesses.

?2025Citigroup

SupplyChainFinancing

Resilience,OpportunityandtheShiftingWindsofTrade

Trade’sshareofGDPhasgrowninexorablysince1970,barafewdipsalongtheway.Inrecentyears,thedirectionoftradehaschangedsignificantly.Foreigndirectinvestment(FDI)inflowsintotheEU,forexample,hasfallenrapidlyasapercentageofglobalinflowssincethepandemic.FDIinflowsintoChina,too,hasfallenastradingpartnersstarttoadopta“ChinaPlusOne”strategy.

CountryFDIInflows(%ofGlobalInflows)

40%

30%

20%

10%

0%

US

-10%

-20%

2005200720092011201320152017201920212023

Source:CitiResearch,OECD

China

EuropeanUnion

GlobalTrade(ShareofGDP)*

65%

60%

55%

50%

45%

40%

35%

30%

25%

20%

19701975198019851990199520002005201020152020

*Tradeisexportsandimportsofgoodsandservices.Source:CitiResearch,WorldBank,HaverAnalytics

NominalReal

%ofTotalChineseExportsRebased

3.5%

3%

2.5%

2%

1.5%

1%

0.5%

0%

20102011201220132014201520162017201820192020202120222023

BreakdownofExports

FromChina(Rebasedto2010)

Vietnam

India

RestofWorld

SouthKorea

Netherlands

UnitedKingdom

USA

Germany

Japan

China,HongKongSAR

Source:UNComTrade,CitiGlobalDataInsights

J

CapitalDeploymentFramework

Thereisatradeoffwhenallocatingcapitaltooneinvestmentoropportunityasitpreventscapitalfrombeingusedonanother.Assuch,investment,distribution,andfinancingdecisionsshould

beconsideredholistically.

Futureneed

ProjectswithNPV>0

DeployableCapital

Invest

?Growth

?Profitability

?Innovation

?Strategicoptions

Accumulate

?Futureoptionality

?Insuranceagainstcashflowshocks

Distribute

?Capitalstructureoptimization

?Potentialforexploitingequityanddebtmispricing

Dividends

Firmis

underleveraged

PayShareholders

Equityis

undervalued

Share

M&A

Repurchases

PensionPlanFunding

Firmis

overleveraged

PayCreditors

Capex

Debtis

DebtRepayment

undervalued

Source:CitiFinancialStrategyGroup

Whatnewcapitalexpendituresorinvestmentsdoesyour

organizationhaveplannedforadeclininginterestrateenvironment?

150%

54%

28%

10%

100%

36%

48%

NorthAmericaLATAM

16%

EMEA

28%

AsiaPacific

Investmentinnew

plantorfacilitiesawayfromhomecountry(FDI)

Note:Responsessumtoover100%duetomultipleresponsesbeingenabledSource:East&PartnersLargeCorporateSurvey2024,CitiTreasuryandTradeSolutions

21%

28%

29%

20%

17%

Investmentinnewplantorfacilitiesinhomecountry

Updatestoourtechnologystack

16%

16%

17%

12%

18%

Pursuenew

M&Aopportunities

8%

11%

10%

8%

6%

Hiringnewemployees

Total

Nonewplans

22%

8%

14%

17%

200%

50%

44%

39%

33%

28%

0%

?2025Citigroup

6citiGPS:Globalperspectives&solutionsFebruary2025

Contents

Trump2.0andGlobalSupplyChains

7

ALookatRecentSupplyChainPressures

9

TariffsandSupplyChainPressures

10

Longer-termConsiderationsforSupplyChains

11

GlobalTrade:AWorldinFlux

14

PuttingWorkingCapitaltoWork:DeploymentBestPractices

24

Surveys

28

LargeCorporateSurvey:AShiftinFocustoFutureGrowth

28

SupplierSurvey:OptimismGrows

39

Suppliers’ESGFocusDeepens

42

ECAsEvolveBeyondTheirTraditionalRemit

45

TransformativeTrendsinReceivablesFinance

47

ShapingTomorrow’sTradeFinance:ThePowerofInnovation

51

SmartContractsandBlockchain:TheMissingLink?

54

Conclusion

56

GlobalTradeTransformed:BusinessesEmbraceInnovationandNew

Opportunities

56

?2025Citigroup

February2025

citiGPS:Globalperspectives&solutions

NathanSheets

GlobalChiefEconomistCitiResearch

RobertSockin

GlobalEconomistCitiResearch

ColeLanglois

SeniorAssociate,GlobalEconomicsCitiResearch

Trump2.0andGlobalSupplyChains

Theglobaleconomicbackdrophasbeendefinedbysurprisingresilienceoverthelastfewyears.Inboth2023and2024,westartedouttheyearwithbearish

expectationsforglobalgrowthonlytofindourselvesconsistentlymarkingupourforecasts

(Figure1

).Alltold,inbothyearstheglobaleconomylookstohavegrowninthevicinityof2.75%,justanotchbelowitslong-termtrend.

Overbothperiods,ourlargestforecastingerrorsformajoreconomiescamefromtheUnitedStates,whichhasbenefitedfromrobustconsumerspendinganda

healthycorporatesector(

Figure2

).Still,theU.S.hasnotbeenthesolesourceoftheseupgradesasothermajoreconomiessuchastheeuroareaandUKhavealsooutperformedourexpectations.Aswegointo2025,theglobaleconomylooks

poisedforanotheryearofnear-trendperformance.

Figure1.EvolutionofCitiGlobalGrowthForecast

Source:CitiResearch

Figure2.CitiRealGDPGrowth:ForecastRevisions

Source:CitiResearch

7

Inflationpressuresmeanwhilehaveeasedappreciablyoverthelastseveral

quarters.Globalheadlineinflation,whichincludesallgoodsandservices,iscloseto2.5%asenergy,food,andgoodsinflationareallrunningnearorbelowpre-

pandemiclevels(

Figure3

).Coreinflation,whichexcludesfoodandenergy,has

trendeddownaswellbutisanotchmoreelevatedduetotherelativelyslowdeclineinservicesinflation.Servicesinflationsshouldcontinuecoolingtowardtargetas

labormarketsloosenfurther,consumersrotatemorespendingtowardgoods,andglobalgrowthcontinuestorunabitbelowtrend.Thisshouldprovidescopefor

centralbankstocontinueloweringratesthisyear(

Figure4

).

8

citiGPS:Globalperspectives&solutionsFebruary2025

?2025Citigroup

Figure3.GlobalInflation*

*Headline&corecover15economies;goods&servicescover12economies.Source:CitiResearch,NationalStatisticalSources,HaverAnalytics

Figure4.DMPolicyRates

Source:CitiResearch,NationalStatisticalSources,HaverAnalytics

Thebackdropforglobalgoodssectorssuggeststhatgoodsinflationisunlikelyto

reignite.Globalmanufacturingactivityremainssoftduetorestrainedactivityin

developedmarkets.ThePurchasingManagers’Index(PMI)forglobal

manufacturinghasbeenhoveringnearorbelow50formuchofthelastfewyears.Atthecountry-level,manufacturingPMIsformostdevelopedmarketsarebelow50,andGermany’sPMIstillsignalsdeepstruggleswithinthesector(

Figure5

).

Industrialproductionandtradevolumesfordevelopedmarketshavesimilarlyshownlittlegrowthinthiscycle.

Therelativesoftnessinglobalgoodsdemandisalsoreflectedinourownsupply

chainpressureindex,whichiscurrentlyrunningnearitspre-pandemicaverage

(

Figure6

).Thisindexhastrackedthecontoursofglobalgoodsinflationinthiscyclefairlywellandsimilarlysuggestsgoodsinflationshouldstaynearorbelowpre-

pandemiclevelsincomingmonths.

Figure5.GlobalManufacturingPMI:Country-LevelDetail

Source:CitiResearch,S&PGlobal,HaverAnalytics

Figure6.CitiGlobalSupplyChainPressureIndex

Source:CitiResearch

?2025Citigroup

February2025

citiGPS:Globalperspectives&solutions

ALookatRecentSupplyChainPressures

OursupplychainpressureindexisbuiltusingdatafromtheglobalPMIs,

inventories,andshippingcosts(

Figure7

).Thedatashowsmodestpressuresonglobalsupplychains,buttherearealsoimportantstorieswithineachcategory.

ThePMIsub-indexincludesthreeindicators–backlogsofwork,inputprices,andsupplierdeliverytimes(

Figure8

).Allthreecomponentshaveimprovedmarkedlyfromrecentstressesandarerunningnearorbelowtheirpre-pandemicaverage.Inaddition,thecomponentshavemovedwithinatightrangeoverthelastyear.

Figure7.CitiGlobalSupplyChainPressureSub-Indexes

Source:CitiResearch

Figure8.GlobalManufacturingPMIs:SelectedComponents

Source:CitiResearch,S&PGlobal,HaverAnalytics

9

Figure9

highlightskeycomponentsofourinventorysub-index.TheGermanIFO

indicatorforfinishedgoodsinventoriesturnedpositiveinthesecondhalfof2022

andcontinuedtorisesharplythroughmid-2023.Ithasbeendriftinghigherandis

currentlynearitshighestlevelinthelastdecade,suggestingampleorevenmore

thanampleinventorylevels.Meanwhile,theU.S.inventorytoretailsalesratiohasbeengraduallyclimbingandisnowwellabovecyclelows,butalsobelowpre-

pandemicaveragesreflectingsolidsalesgrowthevenasinventorieshaveclimbed.1

Avarietyofshippingcostsmeasuresarehighlightedin

Figure10

.Duringthe

pandemic,somekeyshippingcostsincreasedten-foldorevenmoreandwereamajorcontributortoheightenedsupplychainpressures.Throughoutmuchof2023,shippingcostshadfallentolevelsthatwereclosetoandevenbelow2019levels.

However,shippingcostsbegantoriseattheendof2023astheconflictinthe

MiddleEastspilledoverintoattacksonshipsintheRedSea.Thesepressures

wereexacerbatedattimesbythefront-runningofexportsbyChineseproducerstogetaheadofpotentialfuturetariffs.Still,evenattheirworstpointsin2024,shippingcostscamenowhereneartheheightsreachedduringthepandemic.Inaddition,netcostshavecomedowninrecentquartersinpartbecauseshippingcapacityhas

beenexpanded.

1TheinventoriessubcomponentalsoincludesthestockoffinishedgoodsreadingsfromtheglobalmanufacturingPMIwhichiscurrentlyrunningclosetopre-pandemiclevels.

10

citiGPS:Globalperspectives&solutionsFebruary2025

?2025Citigroup

Figure9.Inventoryindicators:U.S.&Germany

Source:CitiResearch,CensusBureau,Ifo,HaverAnalytics

Figure10.ContainerShippingCosts

Source:CitiResearch,Freightos

TariffsandSupplyChainPressures

Supplychainpressuresareathistoricallymodestlevelsatthestartof2025.

However,therecontinuestobeseveralkeyrisksahead.Firstandforemostis

PresidentTrump’stariffs.Whilecampaigning,hepromisedacross-the-boardtariffsof10%orhigher,aswellasa60%tariffonChina.Sincetakingoffice,Trumphascontinuedtohavearobusttoneonthesubjectby,forexample,threatening25%tariffsonCanadaandMexicoandimplementing10%tariffsonChina.

AlthoughthetariffsonCanadaandMexicoareonhold,uncertaintyaroundtariffsremainhigh,andweawaitfurthergyrationsintheAdministration’spolicies.Evenmorerecently,PresidentTrumpsignedanorderdirectinghisAdministrationto

studyreciprocaltariffsontradingpartners–aneffortthatifimplementedwouldmeanincreasingUStariffstomatchcaseswheretariffsontheUSfromother

countriesarehigher.Wecontinuetobelievethat,atleastinpart,Trumpwillusetariffsasanegotiatingtooltopushothercountriestocooperatewithhiskey

priorities.

InourviewofpotentialTrump2.0policies,tariffsposethelargestdownsideriskstoU.S.andglobaleconomicgrowth.TariffsactasastagflationaryshockfortheU.S.economy–loweringeconomicgrowthandatleastinitiallyboostinginflation.WereTrump,forexample,toimplementa10%acrosstheboardtariffandmajortradingpartnersrespondedwithreciprocaltariffs,theeffectcouldbea1.5ppthittoU.S.realGDPbasedonsimulationswehaveconductedusingtheOxfordeconomic

model.Therestoftheworldwouldalsofeelsubstantialdownwardpressureto

economicgrowthaswouldglobaltrade(Figure11).2EvenTrump’smoretargetedtariffsonCanada,Mexico,andChinawouldcreatesizableanddurableheadwindsforallcountriesinvolvedincludingtheU.S.(Figure12).3

Ashighlightedinoursupplychainpressureindex,tariffsfromTrump’sfirstterm

wererelativelymanageableandtheobservedstrainsweremutedcomparedwith

thestressesrecordedduringthepandemic.WeexpectthestrainsunderTrump2.0toalsobemanageable,thoughtheriskofmoreseverechallengesisnowlarger.

2See:

GlobalEconomics-Onquantifyingshockstotheglobaleconomy

and

Global

Economics-Shocksimulation:AUStariffincreasewithretaliation

.

3See:GlobalEconomics-Shocksimulation:TariffsonUSimportsfromCanada,

Mexico,andChina

?2025Citigroup

February2025

11

citiGPS:Globalperspectives&solutions

TheeffectiveU.S.tariffrateinTrump’sfirsttermincreasedbyonly1.5pctpts.Thatfigureislikelyafairamountlowerthanwhatwillbeexperiencedin2025.Trump’s10%tariffonChinaaswellas25%tariffsonsteelandaluminumaloneraisethe

effectiveUStariffratebyroughly1.5pctpts.

Theriskstosupplychainswouldbeamplifiediftariffscomelargerandfasterthanexpected–particularlyifTrumpendsupputtinga60%tariffonChina.SuchtariffswouldimmediatelydisruptsupplychainsthatuseinputsfromChina.Theupshot

wouldbedelaysinproductionandshortagesasfirmsscrambledtofindnew

suppliers.TheeffectswouldhitChina’seconomyhard,buttheywouldbe

symmetricallydisruptivefortheU.S.Thatsaid,smallertariffsonChina–orallowingtheeffectstobephasedin–wouldgiveU.S.producerstimetoadjust.

Front-runningofexportscouldpotentiallyoccurincomingmonths,especiallyif

Trump’stariffthreatsonmajortradingpartnerscontinue.Thisfront-runningrunstheriskofboostingshippingcostsaswesawin2024andalsopotentiallyleadingto

somedelaysandchallengesatUSports.Giventhefavorablestartingpointforsupplychainpressures,suchstrainsarealsolikelytoprovemanageable.

Longer-termConsiderationsforSupplyChains

Intheyearsbeforethepandemic,supplychainmanagementwaspredicatedonthebeliefsthatsupplychainswererobust,reliable,andcosteffectiveandthatthe

demandforgoodswouldberelativelysmoothandpredictable.Thechallenges

facedbymanufacturingfirmsduringthepandemicupendedtheseassumptions,andasaresult,supplychainpracticeshavebeenadjustingtoincorporatethelessonsofthiscycle.

Oneoftheimportantconsiderationsiswheretohouseproduction.Ongoing

tensionsbetweentheU.S.andChinahavehighlightedtherisksofoverly

concentratingsupplychainsinonelocation.FirmsareincreasinglypursuingChinaPlusOnestrategiesandmovingproductionbackhomeortocloserlocations.Thisthemeofreorientationcanbeseeninglobalforeigndirectinvestmentflows(

Figure

13

).TheseflowshavemovedawayfromChinatowardotherdestinationssuchastheU.S.andemergingmarketssuchasIndia,Mexico,andVietnam.

Figure11.Simulation:10PctPtIncreaseinUSTariffsonMajor

TradingPartners(withRetaliation)*

Figure12.Simulation:RealGDPEffectsofUSTariffsof25%onCanada&Mexicoand10%onChina(withRetaliation)*

*SimulationranwithOxfordEconomicsglobalmodel.Majortradingpartnersare

*SimulationranwithOxfordEconomicsglobalmodel.Retaliationincludestariffson

assumedtorespondwith10%tariffsontheUS.

USof10%byMexico&Canadaand5%byChina.

Source:CitiResearch,OxfordEconomics,HaverAnalytics

Source:CitiResearch,OxfordEconomics,HaverAnalytics

?2025Citigroup

12

February2025

citiGPS:Globalperspectives&solutions

Giventhesechallenges,Chinahasbeenincreasingconnectivitywithmany

emergingmarketeconomies.Thesepatternscanbeseeninongoingsizable

investmentsbyChinaineconomiesinAfricaaswellastradeflowsbetweenChinaandemergingmarkets

(Figure14

).Still,thedecreasingflowsbetweenChinaanddevelopedmarketswillcontinuetopresentheadwindsforChina’seconomy.

Moreover,someoftheincreasedtradebetweenChinaandotherEMsisalsotradethatgetsreroutedtotheU.S.(particularlythroughMexico),andtheseflowsareatriskofincreasedscrutinyfromtheTrumpAdministration.

Figure14.ChinaNominalExports(ByRegion)

Figure13.CountryFDIInflows(%ofGlobalInflows)

Source::CitiResearch,OECD

*Comprisedof36countries.

Source:CitiResearch,IMF,HaverAnalytics

Alltold,wedonotsubscribetotheviewthattheworldisde-globalizingonalargescale.GlobaltradetoGDP,forexample,hasfailedtogainupwardmomentuminrecentyears,butitstillrunningonparwithlevelsobservedinrecentdecades

(Figure15).Inaddition,certainaspectsoftradehavecontinuedtogrowand

proliferate–particularlyhigh-techservices(Figure16).Ratherthande-

globalization,weseeareprofilingofglobalizationtobemoreservices-orientedandlessdependentonChina.WhileChinawilllikelycontinuetoplayasizablerolein

globaltradeandproductiongoingforward,thedirectionoftraveltowardalessChina-centricsystemisclear.

WhilethepossibilityofsustainedhigherUStariffsunderPresidentTrumpaswellasthelikelihoodofretaliatorytariffsfromtradingpartnersriskfurtherhamperingglobaltradeandintegration,ongoingglobalizationisalsosupportedbyarangeofstrongtailwinds.Inadditiontoimprovementsintechnology,risingconsumerincomes,

effortsbyfirmsandinvestorstoincreaseefficiencyandprofits,andthedesireofhumanbeingstoexploreandimprovetheirliveshaveallbeenhistoricaldriversofglobalization.Noneoftheseforcesarelikelytobeeasilyblunted.4

ThereadjustmentofglobalproductionawayfromChinacouldpotentiallyaccelerateunderthesecondTrumpAdministrationgiventhelikelihoodofincreasingtariffsonChinaandPresidentTrump’smoregeneralgoalofrevitalizingtheU.S.

manufacturingsector.SparkingamanufacturingrenaissanceintheU.S.wasalsoafocusoftheBidenAdministration,andthiswasoneofthekeyobjectivesofboththe

4Foradiscussiononthehistoryandpotentialfutureofglobalization,see:

Global

Economics-Globalizationvs.Deglobalization:What’sNext?

?2025Citigroup

February2025

13

citiGPS:Globalperspectives&solutions

Figure15.GlobalTrade(ShareofGDP)*

*Tradeisexportsandimportsofgoods&services.Source:CitiResearch,WorldBank,HaverAnalytics

Figure16.GlobalExports:Goods&Services(Nominal)*

Source::CitiResearch,OECD,HaverAnalytics

CHIPSActandtheIRA.PresidentTrumpislikelytotakeotherpolicyavenuesto

supportthesector,perhapsthroughtherecentlyannouncedUSnationalinvestmentfund,buttheendgoalwillbebroadlysimilar.Othermajoreconomiesarealsolikelytopursuepoliciestosupportdomesticproduction.

ThemajorfiscalpackagespassedunderPresidentBidenlooktohavesubstantiallyboostedconstructionspendingintheU.S.manufacturingsector.Still,reshoring

productiontotheU.S.aswellasothermajordevelopedmarketsfacessignificantchallenges.Structurally,manyoftheheadwindsthathaverestrainedtheU.S.

manufacturingsectorfordecadesremain.U.S.wagelevelsexceedthoseinotherpartsoftheworld,solabor-intensivemanufacturingwillnaturallyflowelsewhere.

Manufacturing’sshareoftheUSeconomyhascontinuedtorunnearhistoricallylowlevelsinrecentyearswithfewsignsofamaterialturnaround.Thisbeingsaid,on

topofthelikelyongoingsupportfrompolicymakers,therearearangeoffactorsthatmakearenaissanceintheUSmanufacturingsectorpossibleincludingcheap

naturalgasandtheleadingroletheUSplaysinAItechnologies.

Finally,amajorconcernisthatongoingadjustmentsinsupplychainswillbe

inflationary.Weremainskepticalofthisnarrativeasfirmsarealsolookingto

incorporatenewtechnologiesintotheirsupplychainsandwillfindwaystoincreaseefficiencytomitigateanypotentialneworheightenedcosts.Firms,forexample,willincreasinglycollectandharnessdataateachstageofthesupplychainanduse

toolssuchasAIandmachinelearningtoimprovetheirprocesses.Thescopeforimprovementsisvastandmayincludebettertrackingofgoodsintransit,improvingwarehouseoperations,andchoosingsuppliersmoreeffectively.

Moreover,supplychainshavebeenshiftingforyearsnowandinflationary

pressuresingoodssectorshasremainedexceptionallymuted.Ifthereweretobeabigshock.atthisstagewe’dlikelyalreadyseesignsofit