How do major economies execute de-risking without full decoupling?
Governments are using surgical trade controls, domestic subsidies, and alternative supply corridors to secure strategic sectors while keeping broader trade open.
De-risking is a calibrated policy that isolates strategic vulnerabilities in critical sectors—such as semiconductors, rare earth minerals, and active pharmaceutical ingredients—without severing broader commercial trade. Unlike total decoupling, which seeks a complete division of national economies, de-risking uses targeted export controls, investment screening, industrial subsidies, and supply chain diversification. Governments map single-source bottlenecks, reinforce anti-coercion legal instruments, and form multilateral mineral partnerships to reduce leverage held by competitors. The strategy aims to protect national security and industrial autonomy while preserving the lower costs and efficiencies of global trade.
- 92 percent
- Center for Security Studies, ETH Zürich, April 2026
- US$99.2 billion in FY2024–25
- Observer Research Foundation, 2025
- 16 percent in FY2024–25
- Observer Research Foundation, 2025
- 60 percent
- Center for Security Studies, ETH Zürich, April 2026
- 25% of GDP (up from 16-17%)
- Observer Research Foundation, 2025
What's happening now
Western and Asian economies are attempting to build defensive guardrails around vital industries without dismantling global trade. US Treasury official Scott Bessent recently reiterated that Washington aims to de-risk rather than decouple its economic relationship with Beijing, even as competition over artificial intelligence and advanced electronics intensifies.
The policy distinction is driven by practical necessity. Total economic separation from a major trading partner would inflict severe self-inflicted damage on domestic manufacturing. Instead, major powers are replacing broad tariffs with targeted measures designed to protect specific high-value technologies and critical inputs.
This shift comes as vulnerability in global supply chains becomes increasingly clear. Following retaliatory trade measures between Washington and Beijing, China enacted export controls on rare earth elements in 2025. These minerals are vital for consumer electronics, green energy technologies, and defence hardware, leaving foreign industrial sectors exposed to sudden supply suspensions.
In response, the European Union has moved from a general economic security strategy toward a formal security doctrine. This doctrine balances supply chain audits with legal protections like the EU Anti-Coercion Instrument, allowing the bloc to address economic leverage while maintaining international commercial ties.
How major economies execute targeted de-risking
Supply chain auditing and chokepoint mapping
Governments conduct detailed audits of national industries to locate single-source dependencies. They track critical inputs in advanced computing, renewable energy, and pharmaceuticals to identify where foreign export suspensions could halt domestic production.
Calibrated export controls on dual-use tools
Authorities impose focused export bans on high-end technologies, microchip machinery, and specialised materials rather than general consumer goods. This restricts foreign strategic development without shutting down non-sensitive commercial trade.
Investment screening and capital guardrails
Regulators strengthen inbound and outbound investment checks to ensure foreign capital or acquisitions do not compromise key domestic technology. These legal barriers prevent critical intellectual property from transferring to strategic competitors.
Targeted domestic industrial incentives
State aid and policy incentives fund local production facilities for vulnerable components like advanced semiconductors and battery cells. Subsidies help absorb the initial cost differential of building domestic capacity.
Multilateral friend-shoring partnerships
Nations form trade alliances with trusted partner countries to secure alternative sources of critical raw materials. Shared procurement networks ensure supply chains remain operational if one node faces political or economic disruption.
Who it affects
The economic impact of de-risking is felt acutely in manufacturing hubs like India, where industrial growth remains tied to imported components. In FY2024–25, India–China merchandise trade reached US$127.7 billion, with Indian imports standing at US$113.5 billion against exports of just US$14.3 billion. The resulting US$99.2 billion deficit was the highest India has recorded with any nation, according to data compiled by the Observer Research Foundation.
China accounts for roughly 16 percent of India's total imports as of FY2024–25, making it the country's primary source for capital equipment, electronics components, active pharmaceutical ingredients, and solar power machinery. New Delhi aims to expand manufacturing from 16–17 percent of gross domestic product to 25 percent. Achieving that expansion requires access to competitively priced intermediate inputs, making abrupt severance of Chinese supply lines industrially unviable.
| Region / Sector | Key Metric | Share or Value | Source | Date |
|---|---|---|---|---|
| India-China Trade | Annual Bilateral Deficit | US$99.2 billion | Observer Research Foundation | FY2024–25 |
| India Imports | Chinese Input Share | 16 percent | Observer Research Foundation | FY2024–25 |
| Global Rare Earths | Chinese Mining Share | 60 percent | ETH Zürich CSS | April 2026 |
| Global Rare Earths | Chinese Production Share | 92 percent | ETH Zürich CSS | April 2026 |
Globally, critical mineral dependencies leave Western and Asian manufacturing hubs equally exposed. Data from the Center for Security Studies at ETH Zürich shows China controls 60 percent of global rare earth mining and 92 percent of refined production as of April 2026. Industrial economies including the US, EU member states, Japan, and South Korea face immediate operational bottlenecks whenever trade controls are tightened on these processed minerals.
What's being done, and is it working
Institution
European Commission
Developing a unified economic security doctrine to coordinate export controls, investment screening, and the EU Anti-Coercion Instrument.
Institution
Government of India
Deploying production-linked financial incentives to boost domestic manufacturing while maintaining strict security checks on foreign direct investment.
Institution
US Department of the Treasury
Promoting targeted de-risking policies in artificial intelligence and high-end microelectronics while maintaining general bilateral trade ties.
Institution
Ministry of Commerce of the People's Republic of China
Applying formal export controls on critical raw materials and rare earth technologies to counter Western trade sanctions.
What you can do
Audit supply chains to identify primary dependencies on single-nation suppliers for critical components.
Diversify component sourcing across multiple geographical corridors to reduce exposure to export suspensions.
Monitor regulatory updates regarding export control lists and outbound investment screening mechanisms.
Invest in research and development for alternative materials to reduce reliance on restricted critical minerals.
What we still don't know
- Can major economies successfully build domestic processing capacity for critical minerals without raising production costs to unsustainable levels?
- Will targeted export controls effectively isolate military technologies without inadvertently slowing down civilian technological innovation?
- How effectively can international coalitions enforce shared economic security rules when individual partner states face competing commercial pressures?
Questions readers ask
What is the key difference between de-risking and decoupling?
Decoupling aims for a complete economic break and termination of bilateral trade. De-risking targets only specific high-risk sectors—such as microelectronics or critical minerals—while maintaining standard commercial trade in non-sensitive goods.
Why is total decoupling considered unfeasible for major economies?
Modern supply chains are heavily integrated. Severing all economic links would cause sharp inflation, consumer goods shortages, and widespread industrial disruptions across manufacturing sectors worldwide.
How do critical minerals play a role in de-risking strategies?
Critical minerals like rare earths are essential inputs for electronics, electric vehicles, and defence equipment. Concentrated control over their extraction and processing creates leverage, prompting relying nations to diversify procurement.
