Global supply chains have been extensively restructured since 2020 erupted the global economy. The Covid-19 pandemic, U.S-China trade instability, and the war in Ukraine, among other conflicts exposed vulnerabilities in interconnected production networks. Thus, prompting governments and multinational corporations to undergo strategic, economic reevaluation such as friendshoring: relocating production to politically allied nations and de-risking: reducing reliance on potentially unstable regions. These strategic decisions are framed as mechanisms to stabilize economies and mitigate geopolitical risk. And while they may enhance resilience for advanced economics, they are coupled by significant humanitarian consequences specifically in developing countries. This paper argues that even though these strategies are utilized as a geopolitical arsenal to economic entities, its consequences induced upon the labor market are irreversible and need to be urgently addressed.

The numbers are only going to rise. Millions of workers across the globe are dependent on multinational manufacturing hubs to sustain themselves and their families. When production is lowered or relocated at such a scope, these workers often face job loss or wage suppression, in which both shift them toward lower regulation jobs and on net decrease their economic standing. When at the scale of country-led economic initiatives, social implications are exacerbated: entire communications can face increased poverty and long-term social instability. Although friendshoring and de-risking aim to stabilize global trade, and in theory should trickle down into our low wage communities appreciating macroeconomic stability, too many downsides follow.

Global value chains (GVCs) are crucial for understanding the impact of these strategies. Gary Gereffi, a sociology professor at Duke University, notes that GVCs have expanded rapidly in the late 20th century as multinational corporations fragmented production geographically to exploit comparative advantages in labor, infrastructure, and regulation. This system had permitted developing countries such as China, Vietnam and Bangladesh to access foreign investment and extensive global markets. However, Gereffi continues that this growth occurs within a framework of structural inequity: multinational corporations retain strategic control and flexibility to relocate production, concurrent to host countries and their labor forces remaining dependent on global demand. Such asymmetry added weight to wage suppression, persistently adding vulnerabilities to low-wage workers.

Friendshoring and de-risking amplify vulnerabilities even more. Unlike traditional offshoring, which on net prioritizes cost reduction, these strategies prioritize political alignment and supply security. Though proponents argue that these measures enhance a host country’s resilience, economic modeling endures the opposite. Lubomira Javorick, an Oxford University economist specializing in international trade, co-authored a 2024 study estimating that the widespread adoption of friendshoring by developing countries had the potential to reduce global GDP by up to 4.6 percent due to a drop in efficiency from fractured production networks. Accordingly, the International Monetary Fund projects that “de-risking” scenarios could result in long-term GDP losses of up to 4.5 percent under reshoring and 1.8 under friendshoring, with reductions in input quality across varied sectors. These macroeconomic projections are proven time and time again to disproportionately affect labor-intensive industries such as apparel, electronics, and more.

These projections aren’t absurd, nor are they new. Historical patterns reinforce our understanding of worker displacement as an endemic feature of global production. Federico Mandelman and Andrei Zlate, economists examining labor-market polarization, note that previous manufacturing relocation initiatives consistently prioritized capital mobility over worker security. Similarly, William Olney and Dario Pozzoli show that firm level offshoring decisions, shaped by immigration policies, often leave low-skilled workers in host countries vulnerable. They continue that this was prominently through U.S President Trump’s first term. When he had induced high tariffs on China, manufacturing firms relocated across Asia, specifically to the South. The effect was detrimental, either low-skill workers were left in China with no job, shifting them toward work with worse regulation, or they were forced out of the labor market completely.

Quantitative analysis further backs these dynamics. Matilde Cardoso and colleagues, in a 2021 meta-analysis of offshoring's impact on wages, show that low-skill workers consistently faced suppressed wages across sectors, regardless of national context.

First hand reports confirm these harms. The China Labour Bulletin, an NGO monitoring labor rights since 1994, documents widespread wage delays, unpaid compensation, and reduced orders as brands relocate production from China in response to geopolitical and economic pressures.

Thus, policy must be effectively responsive to the labor inequities exacerbated by these trends. Recent economics research indicates that under conditions of trade uncertainty, firms increasingly turn to automation and labor sufficing technologies, weakening the bargaining power of low-skilled workers. Strengthening regulation through international standards and enforceable corporate accountability mechanisms can assure that firms take account for the social cost of their actions.

Luckily, recent developments illustrate that governments are beginning to shift toward these legal frameworks. One key example is the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD), adopted in 2024, and now entering enforcement. The policy imposes binding human rights and environmental due diligence obligations on EU firms and their GVCs.

In conclusion, supply chain shifts at scale reveal the tension between strategic necessity and human cost in global trade. Although these may protect advanced economics from disruption, they transfer risk onto low-wage workers, further intensifying inequality and precarity. Only by centering labor in global economic strategies can international trade achieve both resilience and fairness.

Read the whole paper here: https://docs.google.com/document/d/1Q4aMovwFHvVG0gQqI0qFW7gj2-6BnHk7i9RlI1zz5CE/edit?usp=sharing

Other Routes to Solve

For people outside government or corporate leadership, the consequences of global supply-chain shifts can feel distant and abstract. Yet there are concrete ways ordinary individuals can engage with labor issues created by friendshoring and de-risking. International organizations such as the International Labour Organization (ILO) (https://www.ilo.org) set baseline global labor standards, and while individuals cannot enforce these rules directly, the ILO’s public reports and conventions give citizens, journalists, and advocacy groups tools to pressure governments and firms into compliance. Consumer-facing watchdog groups like the Clean Clothes Campaign (https://cleanclothes.org) and the Worker Rights Consortium (https://www.workersrights.org) make supply-chain dynamics legible to the public by publishing investigations that link everyday products—clothing, electronics, footwear—to specific labor violations. These organizations also offer straightforward avenues for engagement, including donations, petitions, and brand-targeted campaigns that have successfully recovered unpaid wages for workers in export-oriented industries. For readers interested in tracking corporate behavior rather than participating in campaigns, the Fair Labor Association (https://www.fairlabor.org) and the Ethical Trading Initiative (https://www.ethicaltrade.org) maintain accessible databases detailing company commitments, factory audits, and labor-rights performance across global production networks. Finally, worker-led groups such as China Labour Bulletin (https://clb.org.hk) provide real-time documentation of layoffs, wage theft, and collective action, offering perhaps the most direct window into how geopolitical supply-chain decisions affect workers on the ground. Together, these organizations help bridge the gap between global economic restructuring and individual agency, making the labor consequences of supply-chain realignment visible—and, to a limited but meaningful extent, actionable—for the public.