The Cost of Diversification from China: $23.6 Trillion

The Western world's efforts to reduce its economic dependence on China will take around 25 years and require trillions of dollars in investments, which could also trigger inflation.An analysis by EY-Parthenon, a consulting firm, calculated the cost of the Western world's efforts to diversify from China. According to the report, the distribution of additional investments needed to eliminate dependence on China over a 25-year period is approximately $940 billion per year.

Not passing on these extremely high costs to taxpayers and consumers while localizing supply chains will be one of the most challenging exams that governments and the business world will face in the coming years.

The report notes that sales prices in China are 20-100% cheaper compared to the West. Diversification from China means losing this cheap cost advantage.Experts say that while the annual investment of $940 billion is theoretically possible, it would be an additional burden on top of existing spending plans for infrastructure and defense, driving up prices and central banks' policy rates.