Reshoring Sees Downturn
Reshoring has decreased according to a recent report, The 2025 Reshoring Index: The great reality check, from Kearney. The finding was in contrast to sharp increases between 2021 and 2023.
"This year, we saw a downturn—proof that positive thinking is less effective as a market driver than the basic law of supply and demand—forcing us to confront a hard truth," the report said. "While CEOs are more committed than ever to reshoring, the domestic manufacturing ecosystem is still playing catch-up, so the next phase will require not just capital, but coordination."
Here is an analysis from the report as to why reshoring has slowed down.
The manufacturing import ratio reversed course, as imports from 14 Asian LCCRs grew faster than US domestic manufacturing gross output—leading the Reshoring Index to decline by a staggering 311 basis points.
US manufacturing output expanded by just 1%, despite continued capital investment in recent years. This modest growth, half the rate of the US market’s manufactured goods consumption increase, reflects the longer-than-expected lag between investment announcements and operational capacity coming online.
Nearshoring partners also struggled to keep pace: US imports growth from Mexico trailed the boom of the previous two years. Mexico’s infrastructure—particularly roads, energy, and water—remains a persistent challenge, with several states struggling to provide enough electricity. Its workforce remains competitive, but that advantage is becoming harder to sustain as, driven in part by policy changes, labor costs increased by 4% annually, totaling a 14% increase since 2020.
Canada recorded a year-over-year contraction of 3% in its exports to the US, in large part due to the similarity of the two nations’ manufacturing ecosystems. Labor and other production costs do not differ enough to provide Canada with a decisive competitive advantage.
Filling in the gap between supply and demand, imports from Asian low-cost countries and regions (LCCRs), including China, increased by $90 billion (10%), led by categories such as computer and electronics and electrical equipment.
Reshoring Forecast
Despite the decrease in reshoring activity, the report notes that companies aren’t walking away from reshoring: they’re pausing to reassess. Investments are continuing, but with greater caution.
Reshoring is still popular due to the geopolitical situation. The report found a 50% rise in CEOs citing geopolitical tensions as a primary motivator for reshoring.
The share of CEOs indicating they plan to reshore at least part of their operations in the next three years increased by 15% compared to last year, indicating continued long-term interest in making more products in the US.
"The next phase of reshoring will be defined by hard choices about what to produce, where to invest, and how to compete in a fragmented, fast-moving world, knowing that manufacturing ecosystems scale best when market signals are strong and clear, capabilities are in place, and supply chains can flex and adapt with speed and confidence," the report concludes.