“Mexico, India, Vietnam and Turkey stand out as countries that could benefit from US and EU companies diversifying value chains. For example, Mexico benefits from a large, lower-cost labour force, proximity to the US, and a free trade agreement with the US,” the Morgan Stanley report says. But of these, only one country is large enough to rival China as a means of production and as a major untapped domestic market.
Morgan Stanley believes that the global economy is likely to shift from globalisation to slowbalisation in a multipolar world under geopolitical pressures. The pandemic, US-China tensions and Russia’s invasion of Ukraine have demonstrated the security benefits of relying on one’s allies for economic needs.
“We expect these incentives to drive governments and corporations to invest substantially in onshoring, near-shoring and friend-shoring for value chains,” the Morgan Stanley report says.
