AI boom strains global supply chains with hidden costs

Shih argues that short-term policy responses—such as tariffs or abrupt shifts in manufacturing locations—fail to address the deeper economic principles driving globalization. Instead, he advocates for long-term, regional trade blocs (e.g., North America, Europe, or Southeast Asia) to balance access to low-cost labor, critical minerals, and specialized manufacturing. China’s state-led industrial policies, he notes, have allowed it to dominate sectors like LCD manufacturing and electric vehicles by subsidizing overcapacity and fostering fierce regional competition, a model the U.S. struggles to replicate. Meanwhile, AI’s infrastructure demands are accelerating these dynamics, as data centers and supercomputers compete for the same supply chains that produce everything from smartphones to solar panels.