A Quarter of Key Goods Vulnerable to Supply Disruptions, Study Finds

By Paul Hannon

Almost one in four of the goods traded across national borders are vulnerable to supply disruptions that could have damaging consequences for the economies that import them, according to a study by the McKinsey Global Institute.

With tensions between leading economies having grown over the past decade, and armed conflict affecting key transport routes, the ability of businesses to secure supplies of goods has been placed in greater doubt.

The consultancy's research arm examined the potential for disruption to the supply of 6,000 products that account for $19 trillion of imports around the world, based on whether they were critical to broader economic activity, were concentrated in one or a small number of locations, or were sourced from a potentially hostile country.

It found that 23% of the traded products face two sources of vulnerability, an increase from 15% in 2000, but only 4% face all three, including U.S. imports of rare-earth magnets and smartphones from China.

MGI's study covers trade in 2024, but much has changed since then. To the surprise of many economists, trade volumes rose strongly in 2025 and continued to do so in the first nine months of this year despite the imposition of higher tariffs by the U.S.

However, that acceleration in trade flows was largely driven by the artificial intelligence investment boom and likely increased the vulnerabilities examined by MGI.

"As AI adoption scales, existing supply concentrations could become more consequential, while new dependencies emerge across computing infrastructure and resources such as critical materials," MGI said Thursday.

Electronics already account for a significant share of what MGI calls "Achilles' heel" products. It estimates that electronics, basic manufacturing, and metals and minerals account for more than 60% of such goods. Just five products, including smartphones, memory chips, and laptops, account for 20% of vulnerable products.

MGI said those vulnerabilities won't necessarily be exploited by hostile suppliers, because they would also stand to lose by withholding goods.

"Of course, a country's position as a key supplier of Achilles' heel products or sectors doesn't necessarily mean it would seek to use the position it has for economic leverage, as that carries costs to both sides of a trade relationship," MGI said.

Nevertheless, governments around the world are taking or contemplating action to address vulnerabilities in supply chains. The European Union is working on a package of measures, including what it calls a "diversification instrument," that it aims to present before the end of the year.

Many of the tariff rises announced by President Trump since he returned to the White House have been justified as essential to national security by reducing reliance on foreign suppliers.

Much of the concern about supply vulnerabilities focuses on China, if only because it has become by far the largest producer of a widening variety of goods.

In an examination of 4,606 relationships between 94 economies across 49 industrial sectors, the Organization for Economic Cooperation and Development found that China was the largest foreign supplier in 40% of these relationships during 2024, up from just 4% in 2000.

"In manufacturing in 2024, all 79 of China's partner economies depended on Chinese value-added more than China depended on theirs, by 21 percentage points on average," the OECD said.

According to MGI, China supplies 31% of products that represent the "Achilles' heel" of the U.S. economy, while the U.S. supplies just 8% of such products to China.

In late 2025, the U.S. negotiated an agreement with China to ensure continued access to rare earths, but supplies remain well below levels seen prior to the increase in trade tensions, according to the Center for Strategic and International Studies.

Access to rare earths remains a problem for businesses around the world, according to the International Chamber of Commerce.

"There are severe concerns about the amount of information companies are required to supply to the Chinese authorities and the time it takes to get a license," said Andrew Wilson, deputy secretary general at the ICC.

That isn't to say that China itself is immune to anxieties about supplies of essential products. MGI cited the case of Australian iron ore, which accounts for more than half of Chinese imports of the critical material.

Those vulnerabilities are being felt by businesses around the world, according to a recent survey by the ICC that found 70% of its members saw uncertainty as the main trade challenge.

This year, businesses are placing greater emphasis on diversifying their supplies of goods, rather than building their own manufacturing capacity either in their home country or a more friendly neighbor.

"Businesses increasingly view supply chain diversification as a more viable response than relocating production," the ICC said.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

November 12, 2026 00:15 ET (05:15 GMT)