Lead Story
Great Reallocation in US supply chains accelerates post Liberation Day
Six stylised facts underpin a turning point in US trade patterns as tariffs reshape sourcing, with China losing share and North American neighbours gaining ground.
The CEPR analysis updates the historical arc of the so called Great Reallocation, confirming a clear decoupling from China in US imports while global growth remains positive. From 2017 to 2024, China’s direct share slipped from roughly 21 per cent to about 13 per cent, and by late 2025 the trajectory had pushed further toward single digits as policy shocks and diversification take hold. The shift is not simply a matter of moving from one country to another; it is a broad realignment within sectors and across top trade partners, with Mexico, Canada and Vietnam among the beneficiaries as tariff environments change.
A second strand underscores that diversification within the top 20 import partners has dominated the reallocation. The reshuffle largely occurs within established clusters rather than broad reshoring or offshoring to new regions; the Netherlands even breaks into the top 20, while other economies outside the top tier show limited change. The data suggest that firms are recalibrating within a known ecosystem, rerouting volumes rather than wholesale switching to distant suppliers.
On the precise mechanics, much of the adjustment has occurred on the product-level intensive margin rather than the extensive margin, and the reallocation has accelerated as a result of the Liberation Day tariffs announced in 2025. Imports from China have fallen in a bundle of highly contract-intensive, stewardship-sensitive goods, moving beyond the early, easily switchable components to more embedded supply chains. The speed and scale of the response imply sunk-cost effects at work, with firms opting to reorganise now rather thanwait for market signals to clarify.
The near-term implications look structural. Firms are likely to diversify to reduce geopolitical risk and to hedge tariff exposure, while policy responses are likely to hinge on persistent tariff regimes, partner shares, and evolving flow patterns into 2026. The signal, if confirmed, is that tariff policy can rewire supply chains faster than some would expect, potentially reshaping sectoral incentives, pricing power, and geopolitical risk premia in the windows ahead.
In This Edition
- CBDC and monetary sovereignty: digital euro debate: European sovereignty hinges on legal authority and public balance sheets, not universal access to central bank money.
- Great Reallocation in US supply chains accelerates post Liberation Day: tariffs are accelerating a shift away from China and toward regional partners.
- Gold hits 4 800 as Trump Greenland rhetoric spooks markets: safe-haven demand spikes amid geopolitical jitters.
- Canada expands energy ties into Asia; EVs, LNG, and TMX expansion: Asia demand reshapes Canadian energy exports.
- Kenya launches biggest IPO ever in energy infrastructure: IPO funds pipeline growth and storage facilities.
- EIA STEO: US crude production to dip in 2026-27: output trends influence drilling activity and prices.
- Rio Tinto copper output rises as merger talks loom: copper fortifies growth profile amid takeover chatter.
- US fast tracks deep sea mining permits: streamlined licensing for critical minerals accelerates access.
- Nvidia export controls risk; earnings thesis under scrutiny: policy constraints could cap AI hardware growth.
- EU hydrogen platform opens for buyer interest: platform aims to galvanise Europe’s hydrogen market.
- London Gateway throughput surges: UK container capacity expands amid resilient global trade.
- Venezuela’s energy decline and regime reshuffle: long arc of production and sanctions politics shapes regional energy flows.
Stories
CBDC and monetary sovereignty: digital euro debate
Debate around a retail digital euro is framed by a claim that CBDC is not a prerequisite for sovereignty, with emphasis on legal authority and public balance sheets rather than universal access to central bank money.
A CEPR column argues that monetary sovereignty does not hinge on retail access to central bank liabilities. It suggests that sovereignty rests on credible public backstops, legal authority, and balance-sheet capacity to absorb risk, rather than on universal access to a CBDC. The piece cautions that many sovereignty narratives conflate money with payments, a distinction it says is critical for policy design.
The analysis traces money as a hybrid construct, where government-backed units of account sit alongside privately issued instruments. It notes that stability in modern systems has relied on public balance sheets, regulation, and crisis facilities rather than wholesale access to central bank money for all agents. The author emphasises that private money and payment networks operate alongside public money, with regulatory instruments providing the backbone for stability.
A central implication is that stabilising private money and ensuring robust payment networks may be more effective than introducing a lightly remunerated CBDC with limited distribution. The piece argues that concerns about data privacy, private networks, and Big Tech dominance are more squarely addressed through competition policy and payments regulation than via a retail CBDC. A digital euro, in this view, could serve as a symbolic instrument to reaffirm public money in a digital economy, without displacing private money.
Looking ahead, Parliament submissions and any new stablecoin or balance-sheet policy moves in Europe will be critical to watch. If policymakers shift towards regulating stablecoins and shaping crisis tools rather than expanding retail access to public money, sovereignty debates may pivot toward governance and backstops rather than access, the piece suggests. The debate may become more technical and regulatory, with a sharper focus on the structure and resilience of the financial system as a whole.
Story 2: Great Reallocation in US supply chains accelerates post Liberation Day
Tariff-driven realignment continues, with China’s share of US imports shrinking and regional partners expanding as policy signals sharpen supply-chain resilience and geopolitical risk management.
The piece presents six stylised facts about the Great Reallocation, emphasising that the era of hyperglobalisation has given way to a more fractured policy landscape. It notes that China’s direct share of US imports declined from about 21 per cent in 2017 to around 13 per cent by 2024, dipping further toward 9 per cent by late 2025 as tariffs and policy shifts bite. Mexico, Canada and Vietnam gained shares in response to the 2 April 2025 Liberation Day tariffs, reflecting diversification strategies by firms facing volatile policy.
Contrary to a simple narrative of decoupling from globalisation, the analysis finds limited diversification outside the top 20 import partners. The reallocation has largely occurred within existing trade partners rather than a broad reshoring trend, with the Netherlands becoming a rare new entrant to the top 20. The authors stress that the reallocation is concentrated in sectors that can respond quickly to tariff signals while also shaping long-run supplier relationships.
On the mechanisms, most of the adjustment in import shares occurred at the product level, with both the extensive and intensive margins affected. The local projection approach shows that tariff shocks passed through into product-level values with substantial pass-through, underscoring the price and volume effects of policy actions on trade flows. The research also highlights that the speed of the reallocation reflects firms’ sunk costs in reorganising supply chains rather than mere opportunistic diversification.
The near-term implications point to a more routinised process of tariff-driven reallocation, with flows tilting toward partners with lower tariff exposure and greater supply-chain resilience. The early 2026 data will be telling for whether these patterns persist and how ongoing tariff policy shapes partner choices, regional investment, and the balance between efficiency and risk. As policy signals continue, markets will be watching for how the US negotiates tariff persistence and how partner countries respond with capacity expansions and investment.
Story 3: Gold hits 4 800 as Trump Greenland rhetoric spooks markets
Safe-haven demand pushes gold to fresh highs as geopolitical rhetoric around Greenland fuels volatility and currency moves.
Gold rose above 4 800 per ounce amid a backdrop of geopolitical jitters tied to Trump’s Greenland stance, with gold registering multiple record benchmarks this year. The price surge signals persistent demand for a hedge against macro and geopolitical risk, with central-bank diversification and policy expectations acting as supportive, if not decisive, forces. The gold rally has broadened beyond pure risk-off narratives to influence inflation expectations and currency dynamics.
Analysts point to the broader macro context, including expectations around Fed policy and cross-asset risk premia. The ascent in gold occurs alongside elevated political risk assessments, and the market is pricing in possible adjustments to monetary policy and the dollar's reserve role. Silver has also moved, reflecting a risk-off environment and the attractiveness of precious metals as a store of value in unsettled times.
Market watchers will monitor price targets and policy signals that could extend or reverse the rally. If safe-haven demand remains firm and central banks continue to accumulate gold, the bullion markets could stay buoyant even as other asset classes fluctuate. Conversely, if geopolitical tensions ease or policy clarity improves, gold could encounter a corrective phase as investors reassess the risk premium embedded in sovereign debt and currency markets.
Story 4: Canada expands energy ties into Asia; EVs, LNG, and TMX expansion
Canada shifts energy export focus to Asia, expanding capacity and collaboration to reduce US exposure and capture new demand streams.
Canada is accelerating diversification of its energy exports toward Asia, including a policy pathway that allows up to 49 000 Chinese electric vehicles per year at a tariff of 6.1 per cent. The plan is part of a broader strategy to build a more resilient energy export framework and to help cost-competitively place Canadian EVs in a growing regional market. Asia demand underpins the Trans Mountain Expansion to 890 000 barrels per day and supports a monthly schedule of Aframax tanker loadings.
The agreement with China also encompasses cooperation on small modular reactors and clean-energy technologies, with Canada emphasising the transfer of knowledge rather than immediate construction commitments. The TMX expansion, alongside Asian demand, broadens Canada’s energy pathways and reduces reliance on the US market. Negotiations on ACAFTA and a push for broader energy collaboration with Southeast Asia signal a strategic reorientation toward diversified energy trade corridors.
Officials highlight a measured approach to energy partnerships, acknowledging the regulatory and capital requirements that come with large-scale projects. The shift toward Asia is expected to reshape regional trade patterns, with Canada seeking to balance domestic interests, international competitiveness and environmental policy. Observers will watch for progress on TMX capacity, ACAFTA negotiations, and joint energy technologies such as SMRs as signals of deeper economic realignment.
Story 5: Kenya launches biggest IPO ever to fund energy infrastructure
Kenya’s state pipelines operator seeks to raise funds for expansion, with the listing representing a major capital raise amid debt constraints.
The Kenya Pipeline Company plans to raise about $824 million by selling 11.81 billion shares, representing 65 per cent of the company, in a listing designed to finance pipeline expansion, LPG storage and storage facilities. The capex plan through 2030 is pegged at around $852 million, with the gross profit margin forecast to average about 61 per cent through 2030. The funds aim to accelerate energy infrastructure development, while the equity sale does not entail the company retaining proceeds.
Regional competition and debt sustainability pose risks to the expansion. Uganda’s pipeline and refinery plans are cited as rivals that could erode market share or undermine the pace of region-wide capacity increases. The broader East African context includes Uganda’s pipeline ambitions and the Erd project pipelines, all of which could influence Kenya’s market share and project economics over time. The IPO’s reception will be watched for subscription levels, regulatory clearance, and execution risk.
Projections assume a combination of cash flow generation, debt markets access, and joint venture partnerships to fund the expansion. The government emphasises efficiency and ongoing investment in energy infrastructure as core to sustaining growth. As with other large-scale energy asset IPOs, the outcome will hinge on investor appetite, regulatory approvals, and the ability to de-risk the project finance structure in a context of regional competition and debt constraints.
Story 6: EIA STEO: US crude production to dip in 2026-27
US output is forecast to ease as drilling activity adjusts to evolving price dynamics, with implications for rig counts and market balances.
The EIA projects total US crude production to average 13.59 million barrels per day in 2026, dipping to 13.25 mbpd in 2027 after 13.61 mbpd in 2025. Lower 48 output is expected at 11.11 mbpd in 2026 and 10.87 mbpd in 2027, with Gulf of Mexico volumes around 2.00 mbpd in 2026 and 1.89 mbpd in 2027. These projections align with a softer drilling trajectory in the near term and reflect the sector’s response to price signals and capex discipline.
The forecast carries potential implications for rig counts, oilfield service activity, and price dynamics in 2026 and 2027. Markets will watch closely for shifts in drilling budgets, permitting activity, and responses from major operators in the Permian, Bakken, and other prolific basins. The duration and shape of any production slowdown will influence inflation risk, stockpiling strategies, and policy considerations around energy security.
Observers caution that the numbers hinge on macro conditions, policy signals, and technology costs. A robust response in the form of enhanced efficiency or productivity could offset some of the anticipated declines. Conversely, stronger global competition for supply could force prices higher, even as production remains constrained by capital and labour constraints.
Story 7: Rio Tinto copper output rises as merger talks loom
Copper production growth supports Rio Tinto’s earnings trajectory as potential consolidation with Glencore looms large.
Rio Tinto reported a 5 per cent year-on-year rise in fourth-quarter copper production, driven by strong gains at Oyu Tolgoi and offsetting weakness at Escondida. The company notes that copper remains central to its long-term growth strategy, even as it explores strategic options with Glencore, including a potential offer deadline set for February 5. The company also highlights Pilbara iron ore strength and growing output from other metals, including lithium and aluminium.
The ongoing merger talks frame the copper narrative, with questions over valuation, leadership, structure, and asset composition shaping investment sentiment. Analysts have floated potential deal structures, including a spin-off of coal assets or a copper-centric transaction, reflecting a broader industry trend toward more focused portfolios. Market participants will be watching for any firm offer or strategic clarification ahead of the deadline.
Rio Tinto emphasises its operational discipline, noting efficiency gains and a simpler operating model since the leadership transition. The company is navigating a high-capex, commodity-rich environment, where copper remains a linchpin for future growth. With copper markets volatile but undersupplied in key segments, investors will look for ramp-up signals in 2026 that can inform forecasts for copper supply.
Story 8: US fast tracks deep sea mining permits
NOAA rule consolidates licensing into a single streamlined review to accelerate access to critical minerals from deep sea resources.
The Trump administration has finalised a rule that consolidates licensing for deep sea mineral exploration into a single, streamlined process. The move is positioned as enabling faster access to critical minerals essential for energy transition technologies, including advanced batteries and offshore technologies. Environmental and geopolitical considerations accompany rapid permitting, with stakeholders weighing ecological risks against strategic supply chain considerations.
Advocates argue that a unified licensing approach reduces regulatory friction and speeds up project readiness. Critics caution that consolidated reviews may overlook cumulative environmental impacts and governance gaps. The policy signals a shift toward more aggressive exploration of undersea resources, aligning with broader priorities to secure domestic access to critical minerals.
First licences and the accompanying environmental reviews will be critical indicators. If early permits emerge and environmental protections remain robust, the policy could accelerate development timelines for seabed projects and influence supply-chain planning for critical minerals across North America and allied markets.
Story 9: Nvidia export controls risk; earnings thesis under scrutiny
Regulatory risk weighs on Nvidia as the US considers export controls that could constrain China sales, challenging the AI hardware growth thesis.
Nvidia faces heightened regulatory scrutiny as the US weighs export controls that could limit China sales. Analysts have flagged the risk that a portion of China-bound revenue could be constrained, creating an earnings outlook that faces potential re-pricing if policy constraints intensify. The stock market has already priced in a substantial earnings trajectory, with market expectations implying large-growth discounts if constraints become binding.
Policy developments remain fluid, and the potential impact on the AI chip ecosystem could extend beyond Nvidia to peers and supply chains. Investors will be watching for concrete guidance on China exposure, and any shifts in guidance that reflect regulatory risk. The outcome could reshape AI hardware dynamics and the competitive landscape for semiconductor firms with exposure to China.
Analysts stress that policy changes would need to be calibrated to protect national security while not stifling legitimate technology flows. Nvidia’s response, including capital expenditure planning and product diversification, will be important indicators of how it adapts to a new regulatory regime. Market reaction will hinge on how China sales are affected and how management communicates potential revenue implications.
Story 10: EU hydrogen platform opens for buyer interest
European Hydrogen Matchmaking Platform opens with hundreds of project expressions of interest as buyers rally around a common decarbonisation pathway.
The EU Hydrogen Matchmaking Platform opened for buyer expressions of interest, attracting more than 260 project proposals and setting a March deadline for buyers to indicate appetite. The platform aims to catalyse Europe’s hydrogen market development and diversify supply chains, integrating new projects into a broader decarbonisation strategy. The platform signal is a political and industrial milestone for hydrogen, signalling a more active market-building phase.
Buyers will be watching engagement levels and project approvals as indicators of market maturity and investment attractiveness. The platform’s success will depend on streamlined processing, consistent standards, and clear pathways for funding and regulation. If momentum sustains into 2026, hydrogen projects could become a more material part of Europe’s energy mix, with implications for industrial policy and cross-border energy trade.
Policy-makers will track alignment with broader decarbonisation goals and the development of related infrastructure. In parallel, supply chain players will monitor project pipelines, regulatory approvals, and potential collaboration with research institutions and industry groups. The platform represents a coordinated move to accelerate hydrogen deployment at scale, subject to financial and regulatory feasibility.
Story 11: London Gateway throughput surges
UK port capacity expands as London Gateway handles over 3 million TEU in 2025, underscoring resilience in container trades.
London Gateway reported more than three million twenty-foot equivalent units in 2025, a 52 per cent year-on-year rise, signalling the strength of UK container trade leadership under DP World. The surge highlights a tightening market for capacity and the importance of port infrastructure in maintaining supply-chain resilience. The commentary notes two new all-electric berths and rail enhancements planned for the coming years, reinforcing an acceleration in transport decarbonisation alongside volume growth.
Industry observers view the growth as a core pillar supporting broader UK trade capacity and resilience against global disruptions. The additional berths and rail upgrades are framed as critical infrastructure investments that could bolster the country’s logistics capabilities and marketing position in global shipping alliances. As volumes rise, operational efficiency, electrification, and last-mile connectivity will determine whether throughput gains translate into sustained market share gains.
Story 12: Venezuela’s energy decline and regime reshuffle: a long arc
Sanctions dynamics intersect with energy production trends as Venezuela's output slides and political shifts unfold over years of transition.
Venezuela continues a long arc of energy decline amidst sanctions and a changing political landscape. Production levels, past highs, and the long road to rebuild capacity underscore the fragility of the regime’s energy sector. The dynamic involves significant investment needs, debt constraints, and the external pressures of sanctions policy and international engagement, all shaping the country’s energy trajectory.
Observers note that the energy decline intersects with broader regional geopolitics, including sanctions regimes and shifts in diplomatic alignment. The long lead times and capital-intensive nature of energy reconstruction complicate policy responses and international engagement. Monitoring production data, sanctions developments, and regime stability will be critical to understanding how the country’s energy position evolves in 2026 and beyond.
Narratives and Fault Lines
- The sovereignty debate around CBDCs sits at the intersection of monetary policy and payments policy, raising questions about what a digital euro actually protects and how its symbolic role translates into practical resilience.
- The Great Reallocation reveals a contradiction: while the US is fragmenting supply chains away from China, adjustments are concentrated within established trade partners and product-level shifts, suggesting a managed decoupling rather than a wholesale reorientation.
- Gold’s rally is a confluence of geopolitical risk, central-bank diversification, and macro uncertainty; the question is whether the narrative around Greenland and AI remains the primary driver or if deeper macro shifts will sustain the bid.
- Asia-focused energy diversification by Canada and Africa-forward energy finance in Kenya illustrate a broader realignment of energy trade flows away from traditional anchors toward new markets and routes, with implications for policy and industrial strategy.
- The acceleration of deep-sea mining and hydrogen market construction signals a strategic push to secure critical minerals and hydrogen supply chains, even as environmental and governance questions remain central to the debate.
Hidden Risks and Early Warnings
- Tariff volatility continues to rewire import patterns; watch for abrupt shifts in partner shares or sudden policy pivots that could worsen supply-chain fragility.
- The CBDC debate foregrounds regulatory risk around private money and stablecoins; any tightening on private digital payments could constrain innovation and alter consumer access to digital payments.
- Gold’s rally could be vulnerable if geopolitical tensions ease or policy expectations shift; a rapid unwinding would affect inflation expectations and currency hedges.
- Energy diversification, particularly in Canada and Kenya, carries execution risk around regulatory approvals, capital markets access, and competition from regional rivals.
Possible Escalation Paths
- Tariffs drive further supply-chain realignment as firms seek cheaper alternatives with lower exposure to policy shocks; observable signs include rising import shares for Mexico and Vietnam and falling shares for China.
- US export-control policies move from discussion to binding actions, constraining China-bound tech and AI hardware; observable markers include revised licensing lists and company guidance adjustments.
- Deep-sea mining licensing accelerates, triggering environmental review pressure and potential acceleration of supply; indicators include first licences issued and environmental impact statements.
- Hydrogen market pilots expand toward commercial scale; watch for multi-country project approvals and cross-border energy collaborations.
Unanswered Questions To Watch
- Will the Great Reallocation persist through 2026 and beyond or stabilise at a rebalanced level?
- How will European CBDC policy evolve in relation to private money regulation and stablecoins?
- Can Canada and Kenya sustain energy export growth without eroding domestic capacity or inviting capacity constraints?
- Will Nvidia or other AI hardware firms face effective export controls that constrain growth prospects?
- How will the EU hydrogen platform translate expressions of interest into funded projects and grid integration?
- Will London Gateway and other UK port upgrades translate into sustained capacity gains or bottlenecks elsewhere in the supply chain?
- How quickly will US deep-sea mining licensing become operational, and what environmental safeguards will accompany momentum?
- What is the trajectory for Venezuela’s energy production given sanctions and investment needs?
- How robust will the proposed merger dynamics in copper markets be in a tightening supply environment?
- Do 2026 crude production forecasts prove resilient amid price volatility and capex discipline?
- Will copper, lithium and other critical minerals supply expand sufficiently to meet demand growth in 2026?
- How will the policy stance on digital currencies influence financial stability and payment ecosystems across Europe?
This briefing is published live on the Newsdesk hub at /newsdesk_commodities on the lab host.