The Trump administration wants to reduce American dependence on overseas supply lines by encouraging ‘reshoring’ But returning manufacturers often face old infrastructure, underdeveloped networks and poor labour pools
The Defence and Commerce Departments are pressuring US companies to sharply reduce or end China sourcing and manufacturing; the State Department is working with Australia, India and Japan to reroute supply chains
Manufacturers relocating from Asia to the US are often confronted by creaky factories, outdated infrastructure, underdeveloped supplier networks and mismatched labour, analysts said.
“I don’t believe that countries, any country around the world, can re-skill people very quickly,” said Rafael Salmi, president of Richardson RFPD, a technology engineering company based in Geneva, Illinois.
The access to talent is still a big challenge.”
“You can say I’m going to move production, I’m going to move supply chains tomorrow,” said Salmi. “But then, when you look at it, it doesn’t make sense.”
Business experts said that, while most Western companies shifting production to China since 2001 had sound economic reasons, a modest percentage had not necessarily done the maths, driven more by “groupthink” than sound logic.
The vast majority of companies looking to cut production in China – whether driven by politics, tariffs, rising costs, inordinate exposure or intellectual property theft – is likely to shift their sourcing of export products to Mexico, Taiwan, Vietnam or other non-US location, according to the experts.
But many will keep production in place to serve China’s promising domestic market, they added. And either way, most changes will be gradual.
“It took two to three decades to build that capability,” said Salmi. “It’s going to take, post Covid-19, at least another 10 years to undo that and start building other hubs in Mexico, Costa Rica, Vietnam, Malaysia, et cetera.”
Clive Greenwood, a principal with Wilson, Weedman, Moscioni & Greenwood manufacturing consultants, expects 20 to 25 per cent of foreign companies to shift production from China within the next decade.
Even Taiwan – a well-developed tech hub with few infrastructure concerns – faces rising political risks, Salmi said, as nationalism drives Beijing to flex its muscles in Xinjiang, Hong Kong, the South China Sea and along the Indian border.