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Reshoring to US stagnates, offshoring gathers steam

For the fourth consecutive year, reshoring of manufacturing operations to the United States has once again failed to keep up with offshoring. The reshoring trend seems to be over before it has started. But foreign companies, including many from China, are the ones most eager to invest in US manufacturing.

In contrast offshoring seems to be gathering steam. Industries vulnerable to rising labor costs in China have been successfully relocating to other Asian countries, rather than returning to the United States. They have done so without incurring significantly higher supply chain costs, despite the weaker infrastructure and supporting ecosystems of these new low labor cost destinations.

Vietnam has absorbed the lion’s share of China’s manufacturing outflow, especially in apparel. US imports of manufactured goods from Vietnam in 2015 will be nearly triple the level of imports in 2010. Surprisingly some of the top sectors for reshoring from 2011 to 2015 are also sectors that have led the pack in further offshoring over that same period.

Although reshoring of manufacturing by US companies is on the decline, non-US companies, including Chinese companies, increasingly invest in establishing or expanding their manufacturing footprint in the United States. The insatiable US consumer market, the stable political and economic environment, and the benefit of tapping into American engineering skills and manufacturing know-how are the main draws.

 
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