The shift to global reshoring is already happening
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The global trade order is set to come under new pressure as President-elect Trump returns to the White House. But companies' pushes to reshore business activity and reduce dependence on China are already well underway, per a new survey.
Why it matters: The incoming Trump administration — with its promises of big tariffs and pressure on companies to move activity inside U.S. borders — may accelerate shifts in how multinationals manage their supply chains. But it doesn't change their direction.
- Companies have been adjusting to a fragmented world by relocating more activity closer to where goods are sold, reading the tea leaves that geopolitical fragmentation is here to stay.
State of play: The latest evidence is from a survey, conducted by management consultancy Bain, of CEOs and COOs of mostly $1 billion-plus multinational companies.
- It found that 81% plan to bring their supply chains closer to home, up from 63% just two years ago.
- Those efforts are underway, but far from finished. Only 2% of respondents had fully completed their reshoring or near-shoring plans.
- The share of companies looking to move activity out of China is up to 69%, from 55% two years ago.
Flashback: For a decade, a series of challenges made businesses seek to shorten supply chains and shift manufacturing activity closer to where those goods are sold.
- The election of Trump in 2016 and other nationalist leaders, ensuing trade wars, and tension between China and the West have made companies more eager to guard against geopolitical risk.
- The experience of supply disruptions due to the pandemic and worries about the carbon footprint of long, complex supply chains fueled a new focus on resilience.
Zoom out: All that has translated into "reshoring," bringing production back to home markets; "nearshoring," moving production to closer geographies; and "friendshoring," locating more activity to places with good diplomatic ties.
- Add one more to that lexicon: "split-shoring," or locating more production to within the markets where goods are ultimately sold.
What they're saying: "The desire to shift has not weakened," Hernan Saenz, a Bain senior partner, tells Axios. "Instead, it has strengthened in the last couple of years."
- "What I find surprising is there was already a push in this direction, even before all of these nationalistic governments were elected, and what people found was the push is really hard."
- "And yet, even in a world where people have already tried to do this and found it hard, they're still going to do more of it."
Of note: The survey was completed before last week's election results. But Trump's victory, and his emphasis on economic nationalism, will likely be "yet another accelerator" for the underlying trends.
- "The next time I run this survey, I won't be surprised if the numbers go even higher," Saenz said.
