Investing.com -- BlackRock analysts warned that the reorganization of global supply chains, a key strategic priority for the U.S., is far more difficult than it may appear.
In a recent note, they emphasized that "supply chains can’t be rewired quickly without major disruption," signaling potential challenges in U.S. trade negotiations and the broader economic landscape.
According to BlackRock (NYSE: BLK ), while the U.S. has been moving towards policies like decoupling from China and reshoring production, these shifts face significant hurdles.
"China is a key supplier of critical minerals, semiconductors, industrial parts and auto parts," the note stated, underscoring how deeply intertwined the U.S. and Chinese economies are.
For example, the firm says U.S. imports of computers and electronics alone exceed total domestic production, highlighting the complex dependencies at play.
The note also pointed out that abrupt changes in trade policy, such as the imposition of tariffs, could increase costs, disrupt access to key inputs, and potentially halt production.
Despite these challenges, BlackRock observed signs that the U.S. might soften its trade stance on China. This adjustment, BlackRock believes, reflects growing awareness of the risks tied to a supply shock.
Looking forward, BlackRock expects that while long-term supply chain shifts could lower productivity and growth, the economic rules that govern these changes will help define the trajectory of trade negotiations.
"We stay positive on developed market (DM) stocks," BlackRock said, "but see more near-term volatility." Analysts also noted that uncertainty could hurt long-term capital spending, drawing parallels to the uncertainty following the Brexit vote.
As for investing amid this uncertainty, BlackRock advocates for dynamic portfolios and highlights publicly listed alternative assets as a promising diversification strategy.