Friend-shoring and de-risking

Friend-shoring reorients selected supply chains, production or investment towards trusted partners. De-risking is the broader reduction of concentrated exposure to vulnerabilities without requiring general economic separation. The concepts overlap, but they are not synonyms. Both can combine positive integration with targeted restriction, and neither is equivalent to decoupling, self-sufficiency or economic warfare.

Strategic classification

Friend-shoring primarily combines integration and resilience. Governments may offer finance, subsidies, guarantees, procurement access or regulatory cooperation to build capacity among selected partners. De-risking can use the same positive tools, but it also includes restrictions such as investment screening, export controls or supplier exclusions when authorities identify a specific strategic exposure.

The state nexus matters. A government's programme directed towards a security objective is economic statecraft. A firm's decision to diversify suppliers for commercial reasons is private adaptation unless public direction, obligation or incentive establishes a strategic link. The same investment can serve both purposes, but they should not be collapsed.

Origin and mechanism

US Treasury Secretary Janet Yellen helped popularise friend-shoring in policy discourse in her 13 April 2022 Atlantic Council remarks. She presented deeper ties with trusted partners as a way to secure supply chains while sustaining an open trading system. The Group of Seven's May 2023 economic-security statement adopted the formulation "de-risking, not decoupling". That was a coalition position, not universal consensus.

The European Union's 2023 Economic Security Strategy organises policy around promoting competitiveness, protecting against identified risks and partnering with other countries. This three-part structure shows why de-risking is broader than moving production to allies. It includes assessment, domestic and partner capacity, protection of defined assets and international cooperation.

The mechanism starts with a specified risk: excessive concentration, absence of substitutes, exposure to coercion, security-sensitive technology transfer or vulnerability in critical infrastructure. Policy then changes the distribution of capacity or access. Effectiveness depends on whether upstream inputs, skills, logistics and finance move with final assembly. A new supplier does not create resilience if it remains dependent on the same single-source component.

Costs and distribution

Friend-shoring can reduce exposure to a particular jurisdiction while increasing cost or creating new concentrations inside the preferred group. Beata Javorcik, Lucas Kitzmuller, Helena Schweiger and Muhammed Yildirim model the economic costs of different friend-shoring scenarios. Their results are conditional on how blocs, sectors and trade barriers are defined. They should not be read as forecasts.

The Organisation for Economic Co-operation and Development similarly finds that reshaping global value chains creates trade-offs among resilience, efficiency and distribution. Redundancy may improve continuity under one shock but reduce diversification against another. Subsidies can accelerate capacity but may duplicate investment or shift resources from lower-income economies excluded from the trusted group.

Contestation and limits

The principal dispute concerns the perimeter. A narrow approach protects a limited set of critical functions while preserving broad exchange. A wider approach can become sector-by-sector separation even if it retains the language of de-risking. Partner categories are also political and revisable. Strategic alignment, capability, cost, legal certainty and reliability all shape sourcing decisions; trust does not replace price.

Assessment should therefore identify the protected function, threat model, partner criteria, economic cost, distributional effect and review mechanism. De-risking that does not specify a risk can become protectionism under a security label. Conversely, a precise programme can combine positive coalition-building with targeted denial while avoiding general economic rupture.

See also

Economic statecraft · Economic security as national security · Supply-chain resilience · Collective resilience · Decoupling · Fragmentation (geoeconomic) · Weaponised interdependence

Sources

• Janet L. Yellen, *Remarks on the Way Forward for the Global Economy*, Atlantic Council, Washington, DC, 13 April 2022.
• Group of Seven, *G7 Leaders' Statement on Economic Resilience and Economic Security*, Hiroshima, 20 May 2023.
• European Commission and High Representative of the Union for Foreign Affairs and Security Policy, *European Economic Security Strategy*, JOIN(2023) 20 final, 20 June 2023.
• Beata Javorcik, Lucas Kitzmuller, Helena Schweiger and Muhammed A. Yildirim, "Economic Costs of Friendshoring," The World Economy 47, no. 7 (2024): 2871-2908.
• Organisation for Economic Co-operation and Development, *Risks and Opportunities of Reshaping Global Value Chains*, OECD Economics Department Working Papers, no. 1762 (2023).