Economy

Reshoring Continues Despite COVID Challenges

December 7, 2020

Manufacturing has continued to reshore back to the United States this year, despite the challenges presented by COVID-19. Reshoring will continue to be an essential part of the recovery of the U.S. economy in 2021 and beyond, said Harry Moser, founder of the Reshoring Initiative, an advocacy group he formed in 2010 to bring manufacturing jobs back to the United States.

According to the newly released Reshoring Initiative 1H2020 Data Report, 2020 is on track to add 110,000 jobs as a result of reshoring and foreign direct investment (FDI), bringing the total to more than 1 million jobs brought to the U.S. from offshore in the past decade.

Thousands of manufacturers have offshored production to low-wage countries such as China over the years in pursuit of a cost advantage. Moser and the Reshoring Initiative make a strong case that any savings in labor cost is often more than offset by the many advantages of producing goods closer to home—shorter supply chains and lead times, lower inventories, higher product quality, access to skilled labor, better customer responsiveness, less risk of late deliveries or intellectual property theft, and the marketing benefits of Made in the USA, among others.

More takeaways from the Reshoring Initiative Data Report:

• Because of the pandemic, U.S. reshoring is outpacing FDI for the first time since 2014. In response to uncertainty, companies are emphasizing operations in their home countries.

• The PPE, medical, tech and defense industries should benefit most from national demand to shorten supply chains, close gaps for essential products and make the U.S. less vulnerable. Already, 60% of reshoring cases after March 2020 mention the pandemic as a factor in reshoring decisions.

• Efforts by organizations and states to enable reshoring continue to grow. By year’s end, the Reshoring Initiative will be working with 50 or more companies to reshore approximately 100 products. As a measure of corporate interest, the demand for this service in 2020 is more than 20X the rate in 2019.

• Going forward, President Biden will prioritize reshoring, although he will apply different methods than President Trump.

To cite one example, Biden has proposed a Made in America Tax Credit for companies that invest in manufacturing facilities and jobs in the U.S. and, on the flipside, a tax penalty on the profits of American companies that offshore production and sell their products back to the U.S. Under President Trump, whose decisions on tariffs and trade were often unpredictable, companies tended to delay decisions. President Biden’s plans and policies are likely to be clearer, Moser said.

“Members of the Biden policy team have reached out to me for advice. If they implement our suggestions, reshoring will boom. President Trump did not listen. I hope President Biden will.”