Severing ties with China would result in a $23.6 trillion expense for the West.

      Reducing the West's dependence on China would come at an enormous cost. A recent study estimates that untangling from China could amount to $23.6 trillion over the next 25 years, indicating that the impact would be most pronounced in the sectors essential for Europe's technological future.

      For the past three years, discussions in the West have focused on lessening reliance on China, and this new study attempts to quantify that. According to an exclusive report from the Financial Times, the consultancy EY-Parthenon calculates that the US, eurozone, and UK would need to invest an additional $23.6 trillion over 25 years to sever ties with China in key industries.

      This amount encompasses manufacturing, technology, research, software, and the underlying supply chains. The broader goal of decreasing dependence on Chinese-produced chips and rare earth materials has gained momentum in Western capitals recently.

      The financial strain is not evenly distributed. The analysis assigns a cost of $13.7 trillion to the US, $9.1 trillion to the eurozone, and $800 billion to the UK by 2050. This adds up to nearly $940 billion in extra spending each year, in addition to current commitments to energy, defense, and infrastructure. For the EU, EY-Parthenon suggests that the annual requirement is nearly double its entire budget.

      This estimated cost can be contextualized against the technology it aims to safeguard. The US share amounts to about $550 billion annually, which is similar to the $600 billion that large American tech companies invested in data centers in 2025. In other terms, disentangling from China in Western supply chains would incur an annual expense roughly equivalent to the total investment in the American AI expansion. The materials involved are crucial for chips, electric vehicles, and data centers.

      China's dominance is most pronounced in areas where substitution is most challenging. The International Energy Agency predicts that by 2035, China will provide over 60 percent of the world’s refined lithium and cobalt, while it will control approximately 80 percent of battery-grade graphite and rare earths. These materials are essential components for batteries, magnets, and semiconductors.

      Europe is already facing a challenging decade for its chip industry, yet the raw materials still rely on Chinese refineries. The stakes are not theoretical; last year, Beijing instituted export controls on essential rare earth metals following tariff threats from former US President Donald Trump. Production lines in the US and Europe nearly stalled until both parties reached a truce.

      This situation has prompted the EU to initiate a stockpile of rare earth materials and make new efforts to reduce China's influence over chip supplies.

      However, the report cautions that financial investment alone will not resolve the issues. Alicia García-Herrero, chief economist for Asia Pacific at Natixis, observes that the West cannot quickly disengage even with substantial funding. Beijing exerts control over many key industrial inputs, from rare earth processing to active pharmaceutical ingredients.

      Furthermore, EY-Parthenon highlights another challenge: Chinese products frequently have a factory price advantage of 20 to 100 percent, meaning replacing them would likely increase prices. The firm projects that critical sectors in Europe could see prices rise by 1 to 2.5 percent, keeping inflation above the 2 percent targets set by the European Central Bank and the Bank of England.

      The authors do not suggest remaining stagnant. Mats Persson, a former advisor at Downing Street now with EY-Parthenon, mentions that localizing supply chains without imposing excessive costs on taxpayers and consumers will be one of the significant hurdles in the years ahead.

      He anticipates that the annual expenditure will begin smaller and grow as the undertaking expands. A complete severance from China, he posits, is unrealistic, while a partial separation is feasible. For Europe, this emphasizes the difficult choice ahead. Its pursuit of technological independence now entails substantial costs, with the price of controlling the technologies it seeks to dominate amounting to trillions.