AI’s Expansion Exposes the Economics of Global Supply Chains

Economist and Harvard Business School professor Willy Shih says the rapid expansion of artificial intelligence is unfolding alongside major disruptions in global manufacturing. In an interview about his forthcoming book, Where Does My Stuff Come From? The Powerful Economics Behind Global Supply Chains, Shih argues that supply networks are shaped chiefly by economic incentives, even when governments try to redirect them.

The discussion points to the limits of efforts to bring production back to the United States through tariffs. Companies may shift assembly to countries such as Vietnam or Mexico, or reroute components to reduce tariff costs. Shih cited televisions assembled in Mexico from Chinese parts and new shipping links between China and Mexico as examples of businesses adapting rather than abandoning established production capabilities.

He also argued that China’s dominance in flat-panel manufacturing reflects long-term subsidies and industrial policy, while processing locations for products such as cashews and frozen fish are often determined by cost. Tariffs and other barriers can therefore raise domestic prices without recreating the wider supplier networks needed for complex factories. The interview also links these pressures to AI’s growing demand for computing infrastructure and resources.