Reshoring and FDI investments due to the increase in production of EV batteries in the US accounted for 101,500 new jobs during Q1 of 2023, according to the latest report from the Reshoring Initiative. Supply chain gaps and the need for greater self-sufficiency set the stage for the current upward trend in reshoring.
The Reshoring Initiative 2023 Q1 Data Report, notes that due to the many federal subsidies for manufacturing of essential products, four industries now account for over 90% of jobs added. Those industries are:
- Electrical equipment 47%
- Computer and electronic 22.4%
- TransportationeEquipment 11. 2%
- Chemicals 10.8%
- All other industries 8.6%
Electrical equipment takes the top place because EV batteries are categorized by NAICS code in that industry.
The report notes that as local supply chains are strengthened from the recent large investments, there will be a trickle-down effect of more job creation in a broad range of industries.
Reshoring Growth
If the current rate continues, says the Reshoring Initiative, new job announcements will reach over 400,000 by year-end. To put this in perspective the report says that the cumulative number of jobs brought back since the manufacturing low in 2010 will reach two million - about 40% of what was lost to offshoring.
Comparing reshoring to FDI, reshoring was 62% to 38%, the highest in history indicating, the report notes, that domestic companies are “finally recognizing the value of local production that FDI recognized a long time ago.”
Currently, most reshoring is from cases of “automatic reshoring” - new investments and production that offset extreme rates of imports. In these cases, Country From is not often reported. Of FDI and reshoring where Country From is reported, Q1 data shows the most jobs coming back from Germany, China, Korea and Japan.
The top factors that companies are reporting as reasons for reshoring highlight the concerns, priorities and benefits of returning production to the U.S
1. Eco-system synergies ( i.e. healthy local supply chains)
2. Government incentives
3. Proximity to customers/market
4. Skilled workforce availability/training
5. Infrastructure
6. Impact on the domestic economy
7. Manufacturing/engineering joint innovation ( R&D)
8. Image/Made in USA Brand
Geopolitical Tensions
The report offers an explanation of the geopolitical issues:
The risks of a Taiwan-China conflict or China voluntarily decoupling are focusing those concerns. Destabilizing geopolitical and climate forces have brought to light our vulnerabilities and the need to address them. The White House responded with the Inflation Reduction Act, Chips Act, and Infrastructure Bill, offering some direction and financial security to the companies and industries intent on filling the gaps. These government actions are necessary in the short run but are not sufficient since they do not improve the U.S.’ uncompetitive cost structure. A true industrial policy is the best option to protect the U.S. from the increasing risks associated with geopolitical volatility. It should focus on leveling the cost playing field via comprehensive actions such as massive skilled workforce investments, a 25% lower USD and retention of immediate expensing of capital investments.
