The 2024 Kearney Reshoring Index, released on April 25, finds a US market increasingly importing goods made closer to home and less on goods from low-cost countries and regions (LCCRs) continuing trends that have been set in motion over the past few years.
The report Made in America: Here to stay?, focuses primarily on import and export flows between the US and 14 Asian LCCRs, including mainland China, as well as import trends with Canada and Mexico.
“While it sounds like an election year bumper sticker, the phrase ‘Made in America, for America’ could describe the foreseeable future of industrial manufacturing in the Western hemisphere,” noted Patrick Van den Bossche partner and lead author of the annual Reshoring Index report, in a statement.
“However, that doesn’t mean mainland China and other producer nations are sitting idly by as more and more nearshored goods flow into the US market," Bossche added. "Our research shows an emerging correlation between the uptick in US imports from Asian LCCRs other than mainland China and the rise in imports these countries see from mainland China. Mainland China is now running trade surpluses with Vietnam, India, and Thailand, which in turn are running widening surpluses with the US.”
The Index shows that American, Canadian, and Mexican nearshored and reshored industrial production efforts continue to take market share away from Asian manufacturers, including mainland China. US imports from 14 Asian LCCRs declined from $1.022 billion in 2022 to $878 billion in 2023, while domestic manufacturing gross output (MGO) stayed essentially flat.
While the majority of the drop in Asian LCCR imports was caused by 20% reduction in Chinese imports, for the first time since the inaugural 2013 Reshoring Index, some Asian LCCRs other than mainland China, including Vietnam and Malaysia, also saw a dip in imports.
The report found that imports from Canada have steadily increased since the pandemic, keeping pace with Asian LCCR imports. South-of-the-border trends detailed in Kearney’s 2023 report also continued and expanded in the new Index.
Last year, for the first time since 2013, Mexico surpassed mainland China as the largest exporter to the US. Mexican manufactured goods imported into the US grew by 32%, from $320 billion to $422 billion, since the pre-COVID period.
“US investments in reshoring remain strong, but despite receiving considerable support from both the private and public sectors, domestic manufacturing still faces considerable hurdles, including a lack of skilled workers, labor costs, and infrastructure challenges,” noted Mexico-based Omar Troncoso, a partner in Kearney’s consumer and retail practice, in a statement.
“Our research nonetheless shows that the vast majority of leaders looking to bring their manufacturing operations closer to the domestic market are considering the US," Troncoso added. "This year’s peaking Reshoring Index shows strong continued interest from CEOs in reshoring and nearshoring activities, underscoring what now appears to be a decisive shift in strategic business operations toward manufacturing products closer to the US domestic market. In addition, mainland China’s growing presence in Mexico is testimony to mainland China’s intent to remain a fixture in the US imports picture.”
Added Patrick Van den Bossche, “That said, US companies and consumers are starting to truly ‘buy American,’ as shown by our US self-sufficiency index (SSI), which tracks how what’s made in the United States for the US market compares against what’s imported and stays in the US market.” The SSI gradually declined from 2013 to 2020 but started flipping modestly in 2021 and increased by 5 percent between 2022 and 2023.
The movement of making goods for the US market closer to that market is now well established and strong continued interest from CEOs and their stakeholders in reshoring activities underscores what now appears to be a decisive shift in strategic business operations toward repatriating manufacturing to the United States. To echo the popular song, “Born in the USA” seems to be taking hold.
