How the US Is 'De-Risking' From China (And What It Means for Your Investments)

How the US Is 'De-Risking' From China (And What It Means for Your Investments)

See how the U.S. is reducing its economic ties with China—and what it means for your investments.

A subtle but significant change is under way in world economics—and it's revising how you need to think about your investments. "De-risking" has gone mainstream as America is refashioning its economic relationship with China. Although the two nations are increasingly interconnected, America is taking bold measures to de-risk its reliance on Chinese supply chains, technology, and key industries.

This isn’t just about politics—it’s about economic strategy, national security, and future-proofing industries. And if you’re an investor, it’s also about navigating risks and spotting new opportunities. From semiconductors to clean energy, healthcare to defense, this movement is creating ripple effects across global markets.

Let’s explore what “de-risking” really means, why it’s happening, and how it’s reshaping investment strategies in 2025 and beyond.

What Does "De-Risking" Actually Mean?

To be specific, de-risking is not cutting off China completely. That would be decoupling—a drastic and fanciful thing to do. Rather, de-risking is a more balanced approach where the U.S. seeks to decrease its strategic and economic exposures associated with China.

This policy is about strengthening supply chains, investing in local industries, sourcing materials from friendly nations, and decoupling the use of Chinese technology in sensitive sectors. It's a considered turn away from danger and dependence, not an absolute rupture.

Why Is the U.S. De-Risking From China?

A number of driving factors are responsible for this strategic shift. National security issues have made more noise in recent years, particularly in the wake of Taiwan tensions, South China Sea military build-up, cyber-spying, and concerns over theft of technology. The COVID-19 pandemic revealed just how vulnerable global supply chains are—particularly when they're all in one place.

Economic nationalism is in full swing, and both parties in Washington have expressed support to curb dependence on China. Be it the Trump-era trade tariffs or the industrial policies of the Biden administration, the message is loud and clear: America wants to produce more domestically—or source them from nations that are friendly.

Another factor of concern is China's growingly authoritarian stance and its alignment with nations such as Russia, which has further strained diplomatic relations. With these factors at work, American investors and firms are being encouraged, sometimes mandated, to reconsider the amount of risk they assume by relying so heavily on Chinese collaborators.

The Key Industries Undergoing Transformation

One of the hardest-hit sectors is the semiconductor sector. These small chips drive everything from cellphones to missile systems, but most are produced in Asia, including China. Under billions of federal incentives from the CHIPS and Science Act, Intel and Taiwan's TSMC are now constructing sophisticated manufacturing plants within the U.S. The objective is to make America more autonomous in making the pillar of contemporary electronics.

Clean energy has seen the de-risking drive grow stronger as a result of America's dependence on Chinese rare earth minerals and battery materials. China dominates the massive global supply of the likes of lithium and cobalt—major ingredients in EV batteries. It is to counter this that the U.S. government is subsidizing local mining activities as well as establishing fresh alliances with the likes of Australia and Canada. Automakers like Tesla and Ford are now competing to bring their supply chains in North America.

Healthcare and pharmaceuticals are also a source of concern. The pandemic exposed America's excessive reliance on Chinese factories to produce essential medicines and protective gear. Strategic stockpiles are now being resupplied and new facilities are being designed to keep production local.

The telecommunications industry has also witnessed a definitive change. Chinese technology companies such as Huawei and ZTE have been excluded from vital U.S. networks due to national security concerns. In their response, American companies are swapping their gear with substitute equipment from Europe and North America, and investing in domestic innovation to prevent future vulnerabilities.

How Global Supply Chains Are Being Rewritten

We are seeing a generation-defining reconfiguration of the world's supply maps. US businesses are diversifying out of China by relocating manufacturing to nations with lower geopolitical risk or improved diplomatic alignment. This is where "reshoring," "nearshoring," and "friend-shoring" come in.

Reshoring entails relocating manufacture back to America—a step regarded as job-creation and economic resilience. Nearshoring moves manufacture closer to home, next door to nations such as Mexico, enjoying proximity without Chinese entanglements. Friend-shoring focuses on producing in friendly, allied nations such as India, Vietnam, and South Korea, where there is greater political trust.

For example, Apple is increasing its iPhone manufacturing in India and Vietnam. Nike is partnering with additional factories in Indonesia and Bangladesh. Even Dell and HP, the tech giants, are stealthily scaling back their presence in China and dispersing operations across Southeast Asia.

It is expensive in the short run, but most view long-term security and predictability as being worth it. Firms that transition early will likely be reaping competitive benefits and experiencing less disruption in the coming years.

What De-Risking Means for Your Investments

The economic stakes of de-risking are enormous—and so are the investment implications. On the one hand, it creates some risks, including higher costs through less-effective supply chains and possible retaliation from China. On the other hand, it opens tremendous opportunity for companies that share U.S. policy objectives.

For instance, American manufacturing companies are seeing a rebound in demand and attractive government incentives. Emerson Electric and Caterpillar are among the companies set to gain from industrial reshoring and infrastructure investment.

The semiconductor industry, while experiencing recent instability, is a long-term growth narrative. Companies that make the equipment used to manufacture chips—Applied Materials and Lam Research, for instance—are highly sought after as America tries to establish its own fabs.

Battery metal and rare earth companies are also showing their colors as victors under this new paradigm. Companies such as MP Materials and Albemarle are picking up steam as the U.S. ramps up investment in domestic extraction and moves away from China.

Defense and cybersecurity stocks are also tantalizing. Rising defense spending, heightened cyber threats, and global turmoil all point to increasing demand for products and services provided by Lockheed Martin, Raytheon, and Palantir.

Exchange-traded funds (ETFs) with exposures to infrastructure, reshoring, or U.S. industrial expansion also warrant consideration. Options such as the Industrial Select Sector SPDR (XLI) or semiconductor-themed ETFs provide diversified exposure to this emerging story.

Should You Stay Away from Chinese Stocks Entirely?

This is a difficult question—and the response depends on your risk tolerance. Chinese stocks, especially in the technology space, have experienced huge losses as a result of regulatory overreach and geopolitical tensions. Although there could be value in some names that have been oversold, the long-term risk has now risen dramatically.

China’s government has also tightened control over foreign investments and data privacy, making the country less transparent for global investors. U.S.-listed Chinese companies are under growing scrutiny and may face delisting from American exchanges if auditing issues aren’t resolved.

On that note, simply cutting off China entirely could involve missing growth in the world's second-largest economy. A more prudent strategy might be to restrict direct exposure and concentrate on multinational companies that are able to modify their supply chains while continuing to enjoy Chinese consumer demand.

How You Can Adjust Your Portfolio

Begin with a look through your mutual funds and ETFs. Check how much of your funds are exposed to China or Chinese-linked supply chains. Funds that focus on U.S. infrastructure, domestic manufacturing, and renewable clean energy may provide better resistance.

If you're investing in stocks individually, search for companies that are aggressively shifting supply chains or gaining from government incentives in chips, energy, or defense. Steer clear of companies that are too dependent on one Chinese partner or market, except if they have a strong de-risking strategy in place.

It's also essential to remain current with trade policy, export control, and global events. The environment is changing quickly, and speed is of the essence. Small changes in regulations can impact whole industries overnight.

Lastly, think long-term. De-risking is not a temporary trend—it’s a strategic direction that will influence markets for years, if not decades. By aligning your portfolio with this shift now, you’ll be better positioned to weather disruptions and capitalize on growth as it unfolds.

Conclusion: The Future of Investing in a De-Risked World

The U.S. de-risking of China is a watershed moment for the global economy. It's about resilience, national security, and future-proofing industries—and it's occurring on multiple fronts. For investors, that means realigning expectations, strategies, and even entire portfolios.

While a few sectors will take a hit from increased expense or Chinese pushback, others are set for sustained expansion. American manufacturing, home-grown tech, clean energy, and defense are no longer campaign buzzwords—they are policy-supported investment themes with capital and market momentum behind them.

Whether you’re a seasoned investor or just starting out, one thing is clear: the U.S.-China economic relationship is being rewritten. And those who understand the story—and invest accordingly—will have a powerful advantage in the new era of global investing.