Tariff chaos has reached an almost baffling level. Manufacturers have rising concerns about supply chain disruption and skyrocketing manufacturing costs for materials and inputs. The tariff flip-flops are making investment decision-making nearly impossible.
As of this writing, Trump’s steel and aluminum tariffs are causing U.S. factories to pay more for metal than overseas competitors. A recent Chief Executive’s poll found that 85 percent of CEO respondents think the current uncertainty in U.S. government is a gift to China as a competitive opportunity. The tariff chaos is sapping both business and consumer confidence.
Reshoring can help
First, I want to say that reshoring is always the best choice if economically feasible. Self-sufficiency is paramount to strengthening our economy, providing supply chain resilience and ensuring access to essential goods. It is also the best way to survive the risk of global disruption from tariff shifts, uncertainty and retaliation from other countries. The advantages of reshoring, particularly in terms of self-sufficiency, became evident during the pandemic when delays in importing essential goods, such as prescription drugs and PPE for healthcare providers, created significant challenges.
Localizing production and sourcing reduces geopolitical risk and makes supply chains more resilient and sustainable, encourages investment in infrastructure and workforce development, strengthens the U.S. economy, and generates well-paying jobs in manufacturing and other industries through the multiplier effect. Sourcing locally also provides faster delivery, flexibility, consistent quality and, often, lower total cost.
Reshoring is optimal if or when:
• The work can be done in the United States profitably, based on Total Cost of Ownership (TCO)
• The required workforce can be made available
• The needed technology and components can be made available
From a company’s perspective, the industries and products best-suited for substantial reshoring are those that for which the TCO for the product is lower in the United States or can be made lower via workforce training, automation and product redesign for manufacturability.
The characteristics of such products include:
• Low-labor content, such as plastic injection molding, populating PCBs, and high-volume machining of standard workpieces such as bar stock
• High offshore freight cost and time vs. labor content, such as machinery and commodity materials
• An import volume high enough that a new U.S. factory could be large and automated enough to compete with the imports
• Tariffs apply such that products can be sourced domestically without raising prices or reducing profits if companies use TCO
• Frequent product design changes
• Volatile demand, such as some apparel
• Risk of IP loss
How to prepare
The series of tariff announcements, actions and threatened reactions carry profound implications for manufacturers. Preparation for the global shift is of prime importance.
There is potential for new business opportunities for manufacturers to become suppliers to larger companies that are reshoring supply chains. Here is how you can prepare for those opportunities.
Evaluate your own supply chain risks and shore up vulnerabilities. Promote your agility and response time as compared to offshore suppliers. Promote your ability to enable customers’ JIT inventory.
Engage in workforce training for the skilled workers needed for faster reshoring. Creating a talent pipeline is critical to reshoring and is the No. 1 criterion for U.S. manufacturing site selection.
Secure domestic raw materials and inputs where possible to ensure a stable supply. Monitor U.S. policy changes that may be beneficial to your strategy.
Automate where it makes sense for you. Evaluate the ROI of automation systems based on TCO. Reshoring is a major key to reducing risks and automation helps to make reshoring not only possible but globally cost-competitive.
New automation technologies that overcome labor shortages and offset higher U.S. wages are helping to close the labor-cost gap and reshore more manufacturing to the United States. Use of TCO is key to calculating whether automation will enable reshoring. It is far more feasible to overcome a 5 percent TCO gap than a 30 percent FOB price gap.
A global shift
We are experiencing a paradigm shift in global manufacturing. Reshoring reduces import dependence, secures high-value supply chains vital to U.S. economic and national security, and mitigates risk. If you want to reduce the risk of tariff chaos, I suggest you consider reshoring.
If you are thinking about reshoring, use the correct metrics to evaluate your sourcing strategy and identify opportunities. Companies can use the Reshoring Initiative’s free online TCO Estimator and our new Geopolitical Risk measure to compare alternative sources. Geopolitical risks are the No. 1 factor in reshoring and foreign direct investment (FDI) trends. Consider reshoring as a safeguard against tariff retaliation and ongoing global conflicts and tensions.
Have you reshored a metal component or product? Apply for the National Metalworking Reshoring Award. The winner will be introduced at Fabtech 2025 in Chicago.
Our main mission is to get companies to do the math correctly using the TOC Estimator. By using TCO, companies can better evaluate sourcing, identify alternatives and even make a case when selling against offshore competitors. For help, contact me at 847-867-1144 or email me at harry.moser@reshorenow.org.
