Tariffs Are Coming: Solutions to New Trade Barriers in '25

With global trade changes anticipated under President-elect Donald Trump, new tariffs might alter the economic landscape. Trump suggests implementing a 25% tariff on goods from Mexico and Canada and a 10% tariff on those from China starting immediately.

These tariffs could increase costs and impact the availability of electronics, raw materials, and other products, which could be challenging for businesses that depend on international supply chains.

"Act Globally, Think Locally"

This is an often-used environmentalist catchphrase to address climate change and conservation challenges.

In 2025, this statement will have a new meaning in the manufacturing sector.

Companies are increasingly considering reshoring or nearshoring their operations, bringing production closer to home to enhance resilience, reduce risk, and improve sustainability.

In this edition of 'Engineering 365', we'll explore the growing importance of reshoring for manufacturers, highlighting the benefits and challenges of bringing production closer to home.

What is Reshoring?

Simply put, reshoring involves returning manufacturing and production activities to the United States from overseas locations.

Rather than a simple reversal of globalization, the reshoring trend represents a shift towards a more 'glocal' approach to supply chain management. Glocalization is about balancing the benefits of global reach with the need for local responsiveness and resilience. According to the Economic Policy Institute, for every manufacturing job brought back to the US, seven new jobs are created in other industries.

Where are these jobs going?

The Southern and Midwestern states are leading the reshoring movement, with nearly 60% of jobs returning to the South and 22% to the Midwest. Michigan, Texas, Tennessee, Arizona, and North Carolina are key reshoring destinations.

Risks to Reshoring

• Financial Impacts. Reshoring may involve higher labor, operational, and production costs compared to offshore locations, potentially impacting cost competitiveness, profitability, and pricing strategies. Reshoring initiatives may require significant investments in infrastructure, technology, equipment, training, or workforce development, leading to increased capital expenditures and financial commitments. It may also disqualify you from competing in some offshore markets.
• Workforce Concerns. While reshoring stimulates domestic economies, creates employment opportunities, supports local communities, and contributes to economic growth, and development by investing in local industries, infrastructure, and workforce development. However, companies that are reshoring may face challenges related to skill gaps, workforce availability, training needs, and talent acquisition, particularly if certain skills and expertise are scarce or specialized.
• New Supply Chain Dependencies. Reshoring can increase dependency on local suppliers, partners, and resources, exposing companies to risks related to supplier reliability, capacity constraints, quality assurance, and supply chain vulnerabilities in the home country.

Benefits of Reshoring

• Manufacturers should consider reshoring when aiming to enhance supply chain resilience and reduce exposure to disruptions.
• Geopolitical changes, such as new trade policies, tariffs, or geopolitical dynamics, may necessitate reshoring to ensure better control over supply chains.
• When economic incentives like federal legislation, subsidies, and tax benefits are available, reshoring can become financially attractive.
• Manufacturers focusing on product integrity, quality control, and intellectual property protection may benefit from reshoring.
• Technological advancements in automation and smart manufacturing can make domestic production more efficient and competitive.
• If there are strategic objectives to support local economies, create jobs, and stimulate economic growth, reshoring may be advantageous.

The call to "Act Globally, Think Locally" has never been more relevant to the manufacturing sector than it will be over the next 18 months. Reshoring offers a promising avenue to strengthen supply chain resilience, promote local job creation, and enhance sustainability. Going down this route has its challenges, but the potential rewards are substantial.

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