To diversify supply chains, IPEF countries need to reverse past trends


The members of the Indo-Pacific Economic Framework (IPEF)—Australia, Brunei, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the United States, and Vietnam—seek to diversify their trade partners to help prevent and better respond to future supply chain crises. For the United States, IPEF also has the potential to establish a network of “trusted partners” in Asia, allowing for reduced reliance on China.

The push from the United States to diversify trade could align with concerns in the Indo-Pacific region that China has politicized its trade relations with South Korea, Japan, Taiwan, Australia, and other countries, prompting calls in many countries to reduce dependence on Chinese markets and suppliers.

Trade disruptions and shortages of essential goods caused by COVID-19 and the Russian invasion of Ukraine are reinforcing the push to reduce overdependence on any one source of imports or market for exports.

The charts above indicate that trade among most IPEF members has become less diverse, in terms of imports and exports, for varied reasons. Singapore and Brunei’s higher export concentrations are related to the semiconductor supply chain and China’s Belt and Road Initiative. On the other end of the spectrum, US import diversification reflects a lower market share for China since 2018, when the Trump administration launched its trade war.

Supply chain movements within the Indo-Pacific region have grown increasingly complex since 2010. But as their import sources and export destinations have become less diversified, IPEF countries increasingly depend on Chinese suppliers and buyers. It is uncertain whether the US-backed supply chain agreement, intended to reduce the region’s dependence on China, will affect these trends.

This PIIE Chart is adapted from Abigail Dahlman and Mary E. Lovely’s blog post, US-led effort to diversify Indo-Pacific supply chains away from China runs counter to trends.

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