February 24, 2025 Tariffs Are Here. Should You Reshore or Nearshore?

Consider these options before bringing your supply chain closer to home.

By Bill Remy, CEO of TBM Consulting Group, Inc.

With talk of tariffs dominating the headlines, most U.S. manufacturers are scrambling to reassess their global supply chain. For many, nearshoring and reshoring  seems like the obvious choice for mitigating risk, but some companies remain understandably hesitant: upheaving your supply chain isn’t exactly easy and certainly comes with its own risks.

However, many overlook the fact that avoiding tariffs merely scratches the surface of the strategic benefits of reshoring or nearshoring. There can be a much broader—and arguably more compelling—case beyond tariffs for bringing production closer to home, and the long-term advantages can extend far beyond the immediate cost savings.

Here are 10 factors to consider when deciding whether and how to revamp your supply chain.

1. Supply chain resiliency. Regardless of tariffs, mitigating geopolitical risk is the number one motivation for nearshoring or reshoring programs. Remember when automakers had hundreds of thousands of vehicles sitting on overflow lots, waiting for their missing chips?
   
   If a critical part is held up due to a shipping snag, production decline or a potential conflict between China and Taiwan, for example, U.S. manufacturers could be cut off from suppliers for months, bringing revenue to a halt and forcing panicked reshoring. Avoiding that scenario alone is a compelling case for many to nearshore or reshore.
   
   
2. Total cost of ownership (TCO). Domestic sourcing can reduce inventory levels by 80% and drastically lower shipping costs, driving massive savings in transportation, warehousing and inventory management while simultaneously improving just-in-time delivery.
   
   In fact, Reshoring Initiative data shows that while U.S. products win on price alone only 8% of the time, the percentage of work that is more profitably sourced domestically rather than imported from China jumps to 32% based on total cost—and up to 46% with added tariffs.
   
   
3. Sustainability. Supply chain decarbonization has become a top priority for many companies, considering that commercial transportation alone is one of the biggest contributors to greenhouse gas (GHG) emissions. That means 75% of manufacturing GHG emissions are Scope 3—from the supply chain.
   
   Eliminating transglobal transportation alone could drastically reduce emissions, which is better for investors, customers and the planet.
   
   
4. “Substantial transformation” For companies uncertain about their capacity to bring production back to the U.S., the “substantial transformation test” may provide some flexibility. If a Chinese product undergoes significant manufacturing or transformation in Mexico, for example, it could potentially face fewer tariffs than a product fully developed in China. This could drastically improve the case for nearshoring and avoid some of the workforce and capacity concerns of onshoring in the U.S.
   
   
5. Manufacturing complexity. Components with a simple yet labor-intense manufacturing process will most likely remain in regions with ample, low-cost labor—regardless of tariffs, as suppliers in other parts of the world simply can’t compete. However, those with complex processes or requiring advanced manufacturing techniques may benefit from nearshoring or reshoring.
   
   If for no other reason, bringing engineering and manufacturing closer together appears to have tangible productivity benefits. There’s also an intellectual property consideration as well when having proprietary tools, dies, and other crucial equipment and/or data in adversarial locales.
   
   
6. Stakeholder sentiment. One way of the best ways to build loyalty among your customers to counter any tariff-driven price increase is to display American loyalty yourself. With growing support for U.S.-made (or at least non-Chinese-made) products, reshoring to America supports the domestic agenda. When combined with TCO, this can win favor and increase sales, especially when you promote your commitment to supporting American workers and the domestic economy.
   
   
7. Modernization and automation. If you bring work back into tired old factories with tired old machinery, workflows and processes, reshoring will fail. Instead, manufacturers must focus on improving processes, modernizing facilities and equipment, and optimizing productivity, quality and safety.
   
   Automation can play a key role in improving efficiency and reducing tedious, manual labor. Modernizing factories to feel less like drab dungeons and more like high-tech, high-performance spaces can help too. Automation efforts can help manufacturers see a 48% improvement in productivity and a 42% decrease in operating costs, swinging the stats strongly in favor of onshoring.
   
   
8. Workforce development and training. For years, manufacturing jobs have been overlooked as a generation of workers were convinced a college education was the only path to a rewarding career. Overwhelming student debt has eroded that fantasy for a lot of workers, and we now face a significant skilled labor shortage.
   
   To make reshoring a viable strategy, companies must actively promote rewarding career opportunities through apprenticeships that get folks into the workforce sooner with no college debt. Collaborating with high schools, community colleges and vocational programs can aid in recruitment and specialized workforce training.
   
   Once employees are onboard, employee engagement is key. Effective leadership plays a critical role in creating a culture of trust, coaching, continuous improvement and shared commitment to company goals.
   
   
9. Plant consolidation. Organizations that grow through M&A activity often find themselves with a footprint that exceeds their needs or a distributed workforce that hinders collaboration and efficient innovation. Plant consolidation or relocation can drastically improve productivity and processes.
   
   Conducting facility due diligence through advanced assessments, planning tools and simulation can help identify efficiencies and hurdles before you commit. Manufacturers will also want to keep an eye on the real estate market. If relocation is on the table, you may need to move quickly before you can’t find or can’t afford a facility as the reshoring trend picks up momentum.
   
   
10. Sales strategy. Customers are equally concerned about supply chain risks, including what tariffs and geopolitical instability could mean for their business. Organizations that can successfully mitigate those through reshoring or nearshoring have an opportunity to become the supplier of choice.
    
    Target buyers who are heavily reliant on imports with an Import Substitution Program. Use tools like the TCO Estimator by the Reshoring Initiative to demonstrate a cost-benefit analysis of buying from you instead of overseas. 

Based on the headlines, one might assume there’s a trade crisis about to befall the country. But consider that U.S. import tariffs are already among the lowest in the world, and most of our trading partners impose a 15-20% Value-Added Tax (VAT), which gets passed on to consumers. In other words, U.S. import duties, tariffs, and taxes combined are still lower or on par with almost every trade partner.

That makes process and efficiency improvements perhaps the single biggest factor in the reshoring/nearshoring decision. Fortunately, manufacturers have multiple levers they can pull to optimize productivity, cost savings, risk mitigation and operational resilience to make reshoring/nearshoring a strategic advantage now and in the future.

But you must start immediately to conduct supply chain, workforce and capacity analyses, and devise a plan before your competition beats you to it.

About the Author:
Bill Remy is a senior executive with over 30 years of leadership experience in business management and manufacturing operations. His areas of expertise include operational performance improvement through LeanSigma deployment in manufacturing operations, supply chain, product development and project management. He has experience in broad phases of business leadership across various industries including aerospace and defense, railway, industrial and agricultural equipment, technology and process automation.

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