According to Investopedia, reshoring is the process of returning production and manufacturing of goods back to the company’s original country. Reshoring is the opposite of offshoring, which is the process of manufacturing goods overseas to try to reduce costs and meet competitive challenges.
Apparently, our president is dreaming of a domestic factory revival without addressing key road blocks.
Among the problems facing any effort to bring manufacturing back to the US, perhaps the two most important are a labor shortage and higher costs.
Domestically, there are currently about 500,000 manufacturing jobs that are not attracting any takers. Manufacturing is often unpleasant, hard work and mind numbingly repetitive. For example, assembling iPhones is probably the definition of tedium. Americans, particularly younger ones, view classic factory jobs as unappealing.
Then there is the question of costs and prices. Manufacturing in the US is generally more expensive than in many other countries. It’s not just wages, it is also the plethora of regulations, taxes and many other factors. Consumers have not shown any interest in paying a premium for “made in the USA.”
Investors should recognize that there is still a great deal of uncertainty surrounding the administration’s tariff strategy and that the impact will vary by country and company.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
