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New research reveals that 25% of global trade will relocate within three years. The geographic distribution of global suppliers will fundamentally shift from being mostly global to mostly local by 2026 due to economic and geopolitical instability. A manufacturing paradigm shift from global to local is taking place.
A 2022 nationwide reshoring study of CEOs “whose companies have had recent operations outside of the United States,” found that 58% are now considering reshoring. Eighteen percent are considering repatriation of 75% or more of their operations. Forty one percent estimate the timeframe to have operations fully reshored is one to three years. A 2023 study of U.S.-based manufacturing executives by Forbes, Xometry and Zogby found that “82% of executives polled said they’d either moved overseas factories back home or were in the process of doing so.” The reshoring trend has been confirmed.
An observer might ask, “Have the companies actually followed through on their plans and reshored?” The answer is clearly “Yes.” A 10 year history of surveys confirms the follow-through on companies’ reshoring job announcements.
Each individual survey point was interesting but lacked historical context. For the first time, we have plotted the trend from 7% of companies reshoring in 2012 to 91% in 2022. The survey results have a 97.4% correlation with the number of reshored plus FDI jobs announced per year over the same period.
The clear, consistent trend across six surveys by five surveyors over 10 years confirms the strength of the trend.
Reshoring trend drivers
Reshoring has been thrust into hyperdrive by a U.S. industrial policy push to boost domestic clean-energy manufacturing, increased global supply chain risk, and an understanding of Total Cost of Ownership (TCO). U.S. policy has created favorable conditions for reshoring and FDI facility construction via the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and CHIPS and Science Act. Each act provides funding and tax incentives to spur domestic manufacturing where the U.S. has an excess dependency on imports.
Some of the states that have won manufacturing investment have provided state-level tax incentives, ensured the availability of shovel-ready sites and worker training, and invested in infrastructure.
Source: IMTS+Shifts in the global supply chain via sustained disruption and geopolitical risk are driving more companies to evaluate reshoring. TCO analysis is helping them see that reshoring is economically feasible in about 25% of cases. Markedly rising wages in China, increasing U.S. use of automation, and new trade policies have “reduced the total cost gap between Asian production and nearshoring to almost zero” (Figure 6). It is clear from the report that the authors are using “nearshoring” to mean localization, including both reshoring to the U.S. and nearshoring to Mexico and Canada.
The TCO equation
Total cost of ownership is the best metric to use for comparative analysis. The Reshoring Initiative’s TCO Estimator is a free online tool that helps companies account for all relevant factors to compare the true total cost of domestic and offshore sourcing and siting. These factors include overhead, balance sheet, risks, corporate strategy, and other external and internal business considerations. The impact of using TCO shows that shifting decisions from a price basis to TCO can be expected to drive reshoring of 20% to 30% of what is now imported.
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