What is Onshoring?
Before we discuss the criticality of onshoring for the US, we first need to define what onshoring is. Basically, onshoring is relocating a company’s business operations and/or manufacturing back to the country where that company is based.
How Has the Focus on Onshoring Evolved?
- In 2010 the term found some footing in the public domain.
- From 2012-2014 the term gained momentum in trade and manufacturing publications that identified its benefits and trends.
- After 2016 the term became even more mainstream in the public arena. Geopolitical tension and trade relation troubles played a role in this elevation of the term.
- From 2020 – 2022, the COVID-19 pandemic caused the term to go viral in the public eye because of supply chain shortages and disruptions. These caused countries to look deeply at their dependencies on overseas suppliers.
How Do Trade Imbalances Affect Onshoring Strategies?
As one of the world’s largest importers, the US runs a trade deficit with many countries. These deficits inherently can mean that many manufacturing and production jobs are moved out of the US. With lower wages in other countries many companies find that their costs of creating products is also much lower if they locate their facilities outside the US.
Offshore manufacturing and production is a double-edged sword. On one hand it provides the US consumer with cheaper goods and everyday items. On the other hand it reduces domestic jobs and increases supply chain risks.
Onshoring is more than just a catchphrase — it’s an important strategy for energizing the U.S. job market. While offshoring has helped keep consumer prices low, the long-term benefits of bringing manufacturing back home include job creation, reduced supply chain risks, and a stronger economy. Understanding the evolving landscape of global trade makes it clear that reshoring isn’t just an option — it’s a necessity for America’s future.