'Clear direction' away from US reshoring

13 July 2018

US imports from traditional offshoring countries hit record highs in 2017, according to a report.

A.T. Kearney’s Reshoring Index showed imports from low-cost trading partners rose by $55bn, or 8%, to $751bn in 2017 – the largest one-year increase since 2011.

The index, which assesses reshoring by comparing US manufacturing output to import data from 14 low-cost Asian countries, rose to a five-year high in 2016 in the wake of a presidential election year that focused attention on foreign trade. 

However, it has since dropped off. “Relative growth of imports from the low-cost country trading partners has now outpaced relative growth of US manufacturing gross output in four of the past five years and eight of the past 10 years, showing a clear direction away from significant reshoring,” said the report.

A.T. Kearney ascribed the trend away from reshoring to the continued economic benefits of making labour-intensive products overseas, difficulty in abandoning significant offshore investments and a domestic shortage of skilled labour. 

“Although tariffs and political posturing could impact and potentially change the direction of the reshoring trend, there are many potential futures,” said the report. 

“Companies must weigh the risks and, if imposed, assess the longevity of tariffs on goods from low-cost countries to determine whether the United States is even the most logical location to move their manufacturing capabilities, for example, if China is no longer economical.”

The report said US output could be bolstered by American companies setting up new manufacturing operations at home or foreign companies producing in the US. As US consumers increasingly purchase products designed and marketed by Chinese companies, Chinese companies could end up setting up manufacturing facilities within the US to help meet demand.

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