The Reshoring Revolution: Is "Made in America" Here to Stay?
"Made in America, for America" is no longer just a political slogan used during election cycles but has evolved into a transformative business trend that is reshaping global manufacturing patterns.
"Made in America, for America" is no longer just a political slogan deployed during election cycles but has evolved into a transformative business trend reshaping global manufacturing patterns. According to Kearney's 2024 Reshoring Index (KRI) report, the United States market increasingly relies on goods produced closer to home, with significant shifts away from Asian manufacturing hubs. This strategic recalibration prompts a critical question: Will this reshoring momentum sustain itself as a lasting economic transformation, or will it dissipate after election-year rhetoric fades and economic incentives expire?
The Reshoring Surge Reaches New Heights
The 2024 Kearney Reshoring Index has recorded its highest increase since inception, with the manufacturing import ratio (MIR) jumping by an impressive 196 basis points. This substantial shift reflects a significant reduction in US imports from Asian low-cost countries and regions (LCCRs), which declined by $143 billion from $1,022 billion in 2022 to $878 billion in 2023. Domestic manufacturing gross output (MGO) remained relatively stable, showing a marginal decline from $7.245 trillion to $7.236 trillion over the same period.
This reshoring acceleration is particularly evident in the dramatic reduction of Chinese imports to the United States, which fell by a staggering 20 percent ($105 billion) in 2023. The contraction affected multiple sectors, with computers and electronics experiencing a $30 billion decline (19 percent), chemicals dropping by $14 billion (40 percent), and miscellaneous manufactured commodities decreasing by $12 billion (20 percent). This sharp downturn has reduced Chinese imports to levels lower than those recorded in 2013 when the KRI first began tracking this metric.
Interestingly, this decline is not limited to mainland China. For the first time since 2013, other Asian LCCRs that had previously benefited from China's declining market share also experienced reduced exports to the United States. Vietnam and Malaysia, often cited as primary beneficiaries of manufacturing diversification away from China, saw their American exports shrink by approximately 10 percent and 16 percent, respectively. This comprehensive reduction suggests a broader strategic shift in US sourcing patterns rather than a simple redistribution among Asian manufacturing centers.
Mexico Emerges as America's New Manufacturing Partner
As imports from Asian LCCRs decline, Mexico has emerged as a principal beneficiary of this reshoring trend. In a historic development, 2023 marked the first year since the inaugural Reshoring Index in 2013, in which Mexico surpassed mainland China to become the largest exporter to the United States. US imports of Mexican manufacturing goods have grown dramatically, from $320 billion in 2019 to $422 billion in 2023—a 32 percent increase, representing $102 billion in additional trade.
The expansion of manufacturing operations and warehouse capacity along the US-Mexico border has been particularly noteworthy. A leading warehousing company in Mexico reported quadrupling its business over just two years, with activity concentrated around Ciudad Juárez. While traditional sectors like automotive and electronics continue to drive this growth, other industries are rapidly following suit.
However, this geographic shift presents a complex picture as Chinese manufacturers actively adapt to these changing trade patterns. Rather than abandoning the American market, Chinese companies are establishing manufacturing operations in Mexico to maintain access to US consumers while avoiding tariffs and reducing supply chain distances. Although official foreign direct investment (FDI) from China to Mexico stands at a relatively modest $600 million, Chinese companies announced 19 investments between January and November 2023 totaling $8.14 billion that have yet to be reflected in official FDI reports. This suggests a significant acceleration in Sino-Mexican manufacturing collaboration.
Canada's Unexpected Role in the Reshoring Equation
While Mexico's manufacturing ascendance has captured headlines, Canada has strengthened its position in the US supply chain ecosystem. Total imports from Canada have steadily increased over the past three years, with 2023 seeing a $13 billion rise in US imports across half of all product categories. The transportation equipment sector led this growth with a remarkable 28 percent increase.
This shift is quantified in the near-to-far ratio (NTFR), which measures Canadian imports as a percentage of imports from the 14 Asian LCCRs. In 2023, this ratio increased from 26 percent to 32 percent, indicating that Canadian imports now represent nearly a third of what is imported from Asian manufacturing centers. This development underscores the broader trend toward regional supply chains and highlights Canada's growing importance in the North American manufacturing ecosystem.
Self-Sufficiency Gains Momentum in American Manufacturing
A critical question in assessing the sustainability of reshoring trends is whether American companies and consumers genuinely embrace domestically manufactured products, particularly when they come with higher price tags. The "US self-sufficiency index," which tracks domestically manufactured goods consumed in the US market compared to imports, provides encouraging evidence of this shift. After declining from 2013 to 2020, this index began to reverse course in 2021 and increased by 5 percent between 2022 and 2023—the largest growth since tracking began.
Investment patterns further support this trend toward domestic manufacturing. In 2023, about $900 billion was invested in capital goods, and about $250 billion was directed toward new factory construction, representing a 73 percent increase from the previous year and a 136 percent increase over two years. This substantial capital commitment demonstrates that companies are backing their reshoring rhetoric with significant financial resources.
The reshoring movement is further bolstered by changing business case considerations. According to Kearney's annual KRI survey, improved total landed cost has become the second most important factor in reshoring decisions, likely influenced by persistent international transportation challenges throughout 2023. Other top considerations include increased sales potential, improved fill rates, and enhanced supply chain resilience—all factors that suggest companies are taking a more comprehensive view of manufacturing location decisions beyond simple labor cost comparisons.
Confronting Challenges to Sustainable Reshoring
Despite this promising momentum, significant obstacles remain that could impede the sustained growth of domestic manufacturing. The shortage of skilled labor stands as perhaps the most formidable challenge. According to the US Bureau of Labor Statistics' Job Openings and Labor Turnover Survey, there were 601,000 unfilled manufacturing positions in December 2023. This shortage is particularly acute in advanced manufacturing sectors. The Semiconductor Industry Association and Oxford Economics project that by 2030, 58 percent of semiconductor jobs and 80 percent of projected new technical positions will remain unfilled due to skills gaps.
This problem is partially demographic. More skilled American workers are retiring than entering the workforce, and projections indicate that by 2030, the US will experience a net loss of 26,400 technicians, 27,300 engineers, and 13,400 computer scientists. Meanwhile, the demand for technical talent grows as manufacturing becomes increasingly automated and digitized.
Infrastructure limitations present another significant challenge. The American Society of Civil Engineers' 2021 Infrastructure Report Card assigned US infrastructure a C- rating, highlighting substantial deficiencies. Although the Bipartisan Infrastructure Law has allocated $1.2 trillion toward improving roads, railways, ports, energy systems, and climate infrastructure, these investments will take years to fully materialize and impact manufacturing competitiveness.
Chinese Exporters: Adapting Rather Than Retreating
While the United States may be importing less directly from mainland China, Chinese manufacturers are demonstrating remarkable adaptability rather than conceding market share. A sophisticated pattern is emerging: Chinese exports to other US trading partners have steadily increased. Mainland China has trade surpluses with countries like Vietnam, India, and Thailand, which are running widening surpluses with the United States.
This correlation between increasing US imports from non-Chinese Asian LCCRs and those countries' imports from mainland China suggests that, in many cases, these nations have become intermediaries in the journey of manufactured goods from China to America. Vietnam, for example, experienced a 75 percent increase in imports from mainland China between 2018 and 2022, precisely during this period, when Vietnam became one of the primary beneficiaries of shifting US import patterns.
Chinese manufacturers are also pursuing strategic shifts in their business models. They are moving away from complete domestic assembly and toward leveraging international manufacturing hubs for final assembly while maintaining control of higher-value components and intellectual property. This approach is evident in their foreign direct investment patterns, with increased investments not only in Southeast Asia but also in Mexico, Poland, Morocco, and parts of Africa.
Long-term Sustainability of the "Made in America" Movement
The question remains: Is the "Made in America" movement a temporary phenomenon driven by political rhetoric and pandemic disruptions, or does it represent a lasting structural change in global manufacturing patterns? The evidence points toward the latter, though with important qualifications.
Government incentives through programs like the CHIPS and Science Act and the Inflation Reduction Act have catalyzed significant domestic manufacturing investments. Since the CHIPS Act's enactment, the private sector has announced investments in semiconductors and electronics manufacturing capacity totaling $231 billion. However, the long-term viability of these investments depends on achieving competitive returns on capital employed (ROCE), which remains challenging given higher operating costs in the United States.
Developing a robust domestic supplier ecosystem presents another challenge. Kearney's survey found that only 34 percent of companies that restored manufacturing operations can source all raw materials locally, and just 41 percent can source all parts locally. To address this limitation, 26 percent of these companies have already asked their Asian suppliers to establish operations closer to the US, and another 53 percent are considering similar requests.
A Transformed Manufacturing Landscape
The shift toward manufacturing goods closer to the US market appears firmly established rather than a temporary aberration. The Kearney Reshoring Index has reached its highest point in over a decade, while CEO surveys indicate sustained interest in reshoring and nearshoring initiatives. Importantly, companies and consumers increasingly prefer American-made products, suggesting that market forces align with policy incentives to drive this transformation.
However, this manufacturing renaissance faces significant headwinds. Beyond the well-documented skilled labor shortage, American manufacturers grapple with product quality challenges, relatively high labor costs, and infrastructure limitations. Addressing these issues will require coordinated government policies, sustained public and private investment in workforce development, infrastructure modernization, and strategic partnerships with Mexico and Canada as integral elements of a North American manufacturing ecosystem.
While election-year politics may temporarily divert attention and resources in 2024, the foundation for a sustained North American manufacturing resurgence has been established. Even if the Reshoring Index experiences a temporary decline in the coming year, the structural shifts underway suggest that "Made in America" is evolving from a political slogan to an economic reality.
