These events, coupled with other factors, have led many companies to explore reshoring their production to the United States or nearshoring to neighboring areas such as Mexico and Latin America. Deloitte estimated in November that American companies were expected to reshore 350,000 jobs in 2022. And for the apparel industry in particular, some experts believe the benefits of making such a move could far outweigh the costs of relocating production from Asia.
Driving factors
One of the biggest lessons many companies learned during the pandemic was the importance of a diversified supply chain. As Covid shutdowns in China, Vietnam, and other Asian countries persisted long after the U.S. began reopening, factories supplying products to American brands fell far behind, leaving empty store shelves and panic for both manufacturers and retailers.
And once production finally ramped back up, clogged shipping lanes and ports—along with astronomical transit rate increases—further complicated the problem for importers. Now those problems have mostly abated, but a variety of other issues make Asian production—particularly in China—less attractive than in the past.
“No matter who’s president in the United States, U.S.-China relations are going to continue to deteriorate,” said John Hyatt, founding partner, The Mexico Strategic Sourcing Alliance. “And people don’t want to do business in China because of, one, IP theft. Two, if things overheat with what’s going on in Taiwan, companies are going to be up the creek without a paddle again, just like they were during the logistics crisis 18 months ago.”
Though they haven’t been as widely discussed as several years ago, the tariffs enacted by the Trump administration, which have not been rolled back by the Biden administration, continue to add to costs for U.S. companies importing from China.
“People forget that importers are still silently suffering from 25 percent tariffs if they import from China,” said Raine Mahdi, founder of global sourcing platform Zipfox. “Although rates in China are usually cheap, it’s still a large part of their cost.”
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Source: Sourcing Journal
