Article: A Friend-Shoring Perspective of the Inflation Reduction Act

The COVID-19 pandemic disrupted supply chains around the world and uncovered the dangers of having a concentrated supply chain. With the geopolitical tensions between the US and China and the invasion of Ukraine, the need for friendshoring supply chains in critical green sectors like electric vehicles (EVs) has become a top concern for the US and other countries in the West. The US is adopting measures to support the production and adoption of EVs with the objective of not just ensuring a low carbon footprint, but purportedly to reduce dependency on ‘countries of concern’, revive its manufacturing sector, and make the supply chain resilient. This has eventually led to a race among the US and other countries to augment the production of EVs. The Inflation Reduction Act (IRA) is the culmination of the efforts to support green transportation of the future while supporting domestic production, deepening economic ties with friends and reducing overreliance on potentially hostile countries. Against this background, the authors attempt to analyse the IRA from the perspective of ‘friendshoring’. Friendshoring, supply chain, Inflation Reduction Act, nearshoring, US-China trade relations