The nearshoring shift is nothing new, but one recent report indicates it’s progressing at an increasingly rapid pace. As trade tensions increase — especially with China — many companies are either contemplating bringing their supply chains closer to home or have already taken steps to do so.
And with the U.S. presidential election behind us and a new administration set to move into the White House in January, some experts predict an increased emphasis toward both nearshoring and onshoring, too.
Benefits of nearshoring
Nearshoring offers various benefits, such as improved oversight and quality control of manufacturing processes — as well as fewer challenges to meet evolving supply chain needs.
In an article for SupplyChainBrain, Patrick Ward — vice president of marketing at software development consultancy Rootstrap — cited some of the perks nearshoring can bring:
- Better oversight and quality control: “With nearshoring, companies can more easily visit and maintain direct communication with key suppliers. …”
- Improved speed to market: “By sourcing more locally, companies can reduce transit times and improve their competitiveness and profitability. …”
- Reduced supply chain expense: “Many companies flocked to China in search of low wages, but the total cost of outsourcing tends to be much higher than expected, due to the complications of shipping goods over long distances. …”
Ward said benefits like those can lead to transformation in key areas, including:
- Product development: “Companies can work more closely with their suppliers and collaborate more effectively on product design and development. …”
- Product strategy: “Companies can benefit from more rapid response times to fluctuations in customer demand or market conditions. …”
- Go-to-market strategy: “Companies can more effectively launch new products and time market entry to align with changes and trends in the marketplace. …”
The value of proximity
In its new report released October 8, The Proximity Premium, U.S. audit, tax and advisory firm KPMG LLP describes proximity as the “new value driver” for U.S. supply chains.
“Business executives are strategically reshaping their supply chains to achieve greater efficiencies,” the press release says. “Nearly three-quarters of business executives report that strategic shoring has successfully enhanced supply resilience and operational agility.”
Citing the proven vulnerabilities of long, globalized supply chains, KPMG says the combination of this dynamic and “geopolitical and ongoing economic uncertainty” are creating a nearshoring shift. Among the 250 U.S.-based executives at companies with annual revenues of at least U.S.$1billion surveyed, 76% of respondents said they were moving their supply chains closer to the Americas to better serve the U.S. market, citing the ability to:
- Reduce lead times
- Diversify supply
- Maximize access to talent
- Minimize risk
Noting that supply chain fragility can “weaken the larger business ecosystem and exacerbate global inflationary pressures,” KPMG said that among the respondents:
- 61% indicated that the “volatile global trade environment” is “forcing their business to refocus on regional and domestic sourcing and distribution”
- 55% of those with “higher performing supply chains” also “recognize the importance of navigating the tax and regulatory landscape”
- 53% indicated that “regulators and tax officials are significant influences in strategic shoring decision-making”
Additional report findings include the following.
Companies are streamlining their supply chains in the Americas
- 76% are “prioritizing immediate strategic shoring actions”
- “The Americas’ share of supply chains to the U.S. is expected to rise by 16%, while the average number of locations in a single supply chain is being consolidated for efficiency measures, falling from 2.7 to 2.4 locations over the next three years.”
Strategic shoring bolsters supply chain resilience and optimizes cost efficiency
- 73% said their company has “increased their supply chain’s cost efficiency via strategic shoring, enhancing their operational and financial performance”
- “While still the primary goal in supply chain strategies, cost as an outcome has declined in importance over the past two years by 4 percentage points. In contrast, less tangible ambitions such as speed, flexibility and sustainability have gained importance by two, three, and two percentage points, respectively.”
- 61% said “strategic shoring will help reduce the carbon footprint attached to products, positively impacting their sustainability efforts”
Tax, data and analytics: Most important capabilities to boost sourcing strategies
- Respondents reported that “the current tax environment (23%) and regulatory policies (31%) are among the top five challenges to achieve certain strategic shoring initiatives”
- 53% said that “regulators and tax officials are significant influences on their strategic shoring decisions — second only to shareholders, at 56%”
- 43% identified “data and analytics capabilities as most important to advancing sourcing”
A focused regional supply chain contributes to a more stable and robust macroeconomic environment
- 55% view “resilience and faster time to market as the dominant objectives pushing their companies to nearshore”
- 75% said their company has “successfully used strategic shoring to strengthen its supply chain resilience”
“Business executives are re-evaluating their supply chain assumptions with a primary focus on regional and domestic sourcing and distribution to mitigate geopolitical and economic uncertainty,” according to Jean-Pierre Trouillot, Partner, Deal Advisory, KPMG U.S., and Latin America Regional Advisory Leader, KPMG Americas. “Companies are seeing strategic shoring as a way to improve supply resilience and operational agility, offering them the benefits of proximity, cost efficiency and access to resources.”
A post-election shift
President-elect Trump’s recent landslide victory is expected to create a major shift in global trade. In a November 8 article for Supply Chain Digital, Editor-in-Chief Tom Chapman describes Trump’s “love of tariffs” as a major factor that will likely influence how companies proceed when it comes to reshaping their supply chains.
He cites Alex Saric, CMO at Ivalua as predicting the likelihood of a “greater escalation of tariffs and ‘Buy American’ provisions as part of a broader industrial policy agenda.”
“Alex says organisations should prepare for the possibility of either nearshoring or onshoring operations, factoring in evolving ‘made in USA’ thresholds and the potential exclusion of nations like China,” writes Chapman.
Based on statistics from the Office of the United States Trade Representative, he describes the U.S. as the “largest importer of goods in the world.”
“US goods imports from the rest of the world totaled a staggering US$3.2tn in 2022, up 14.6% on 2021,” Chapman says. “China was, by a fair distance, the top supplier of goods to the US, accounting for 16.5% of total goods imports. …Trump’s threatened tariffs of up to 60% on China could very likely prompt businesses to reconsider the location of various elements of their supply chains.”
In a November 7 post for public accounting and consulting firm Crowe LLP, Principal Dan Swartz concurs that companies should prepare for potential major shifts ahead.
“President-elect Trump campaigned on imposing a 10% universal tariff and a targeted 60% punitive tariff on Chinese-originating goods, with the stated goals of decoupling U.S. dependency from China, increasing the U.S. manufacturing base especially with critical industries such as steel and aluminum production, and opening market access abroad for U.S. exports,” Swartz writes. “… It is uncertain whether the strategy will be to impose tariffs immediately and seek concessions after the fact or if it’s to use the threat of tariffs as a ploy to get trading partners to the table quickly to negotiate. Regardless, companies engaged in international trade should consider exploring duty minimization opportunities now.”
He also notes that while some companies may be relying on “dual sourcing and nearshoring as possible tariff mitigation solutions,” the United States-Mexico-Canada Agreement (USMCA) that provides the foundation for that scenario is up for review in July 2026.
“… member countries may decide to opt out, leaving the future of the USMCA in question,” Schwartz writes. “This shift could have a significant impact, especially on capital-intensive manufacturing operations that have been enjoying preferential duty privileges first under the North America Free Trade Agreement starting in 1994 and through the newly implemented USMCA in 2020. Furthermore, Mexico’s proposed judicial reforms and the recent election of a self-proclaimed socialist as president are raising eyebrows with multinationals that operate in the country.”
He says factors such as these and others could “drive a shift toward nearshoring and onshoring,” which could be good for domestic manufacturing and jobs. However, Schwartz says these trends could also “significantly increase labor and material costs compared to Mexico and China, adversely affecting profit margins,” in addition to the capital investments needed for infrastructure creation.
“Businesses might face a choice between paying a premium for offshored operations due to potential tariffs or investing in nearshored operations with higher operating costs,” he says. “As policymakers and businesses consider these factors, the future landscape of U.S. manufacturing and global trade relations remains uncertain, with potential adverse impacts on operating costs, capital expenditures, supply chain resilience, and consumer prices.”
