Podcast: Will Trump's tariffs impact North American reshoring initiatives?

Rosemary Coates is the executive director of the Reshoring Institute, as well as the President of Blue Silk Consulting. She has more than 30 years of experience in supply chain, reshoring, and nearshoring, and is the author of several books including 42 Rules for Sourcing and Manufacturing in China, and the Reshoring Guidebook.

Rosemary appeared on the podcast in 2024 to talk about the general impact that reshoring initiatives were having in North America, and in this new episode she unpacks some of the ripple effects on reshoring that might occur as a result of new 25% tariffs on goods from Canada and Mexico curretly being proposed by the Trump administration.

Below is an excerpt from the podcast: 

PS: The last time you were at the podcast, you talked about reshoring issues when we were in the last year of the Biden administration, and one of the reasons we're talking today is that we are now in week two of the second Trump administration. And so we're going to look at what impact his proposed policies might have on reshoring. 

Maybe we can start with the first question, which is, what's your sense of the current state of reshoring in the U.S.? And could you mention the policies that you think have had the most influence moving the needle on stuff like this, like USMCA or the Inflation Reduction Act?

RC: As we had talked in the past, there is a general movement towards reshoring. We've been around for 10 years, so we've been doing reshoring projects since 2014, so a long time. We've seen a steady increase in concern over manufacturing in foreign locations and a desire to bring manufacturing back, either through reshoring to the U.S. or nearshoring, mostly to Mexico. That's been a gradual increase and then after the pandemic there was a lot of interest; many companies really suffered through the ups and downs of the pandemic and trying to source overseas and not being able to get parts they needed on time, so there was a giant uptick there.

Now again, we're seeing another big spike in interest after Trump was reelected. Many companies are very concerned about the increase in tariffs and the changes in international policy that may affect global supply chains. We're seeing once again a significant impact and uptick in reshoring interest. I'll tell you, phones are ringing. We're pretty convinced there's lots of companies asking for help these days.

PS: That’s interesting… would you say the policy decisions of the past four years have nudged reshoring along as well, or is this a case where, it seemed like a lot of the manufacturing sector there was a big wait and see attitude, waiting for interest rates to come down, waiting for other factors before manufacturers made big moves like this.

RC: All of those economic factors go into the decision making process and they have for a long time, although I would say in the last few years there's much more heavy analytics when it comes to making that decision for reshoring. 

The three big acts, so the Inflation Reduction Act had significant funding for green energy, so we're seeing a lot of green energy development and that's been going on the last couple years. There's certainly the CHIPS and Science Act, which has really fueled the fire in building semiconductor capability in the U.S. We were sorely lacking for so many years and way behind in production, and now we're building plants in Arizona, New Mexico, Idaho, Texas, Ohio and New York, all over the place. We're building semiconductor plants which should come online within the next 5 to 10 years. 

And then the Infrastructure Act, the third big one of course, has got billions of dollars in funding to repair our roads and bridges and update our airports and so forth. That's really important because no matter where you are in the production scheme of things, you need to be able to move your goods over those roads and through those ports and so forth. Without having those repairs done, with major bridges that are out across the country or need in need of repair, it's really important to have that money there. 

Now the thing is though, these acts were passed during the Biden administration and the funding was made available, but it takes a long time to have that move through the system so that projects can actually be started. So even though the acts were passed two or three years ago, we're just now starting to see some of that funding come through. So there's not as much activity I think over the last couple years as we're going to see now going forward, a lot more emphasis going forward.

PS: All those factors you mentioned bring back a story that someone told me who works in semiconductor chip manufacturing, in a finishing plant in Pennsylvania. He would often say that the challenge – this is about a year and a half ago – the supply chain challenge was such that they always had something to work on through the week, but for a while there you weren't sure which raw materials or which chips would come in at what time. They had to become nimble by necessity and change over the lines once they knew what materials were going to show up. I always think of reshoring as an effort to make sure that you do inject a certain greater predictability into your workflow.

RC: Yeah, that’s really true, predictability is what all businesses hope for, right? An unpredictable environment is very difficult to manage. But there are lots of global supply chains where there are significant parts that can't be produced anywhere else. Suppliers have to be redeveloped and so forth. But there are also complicating factors. Take the war in Ukraine, for example, it's halfway around the world and we're not thinking so much about it every day anymore. But Ukraine produces about 40% of the world's neon gas, and neon gas is used in the etching process for semiconductors. When the war started, the Russians bombed the neon gas factories, those were some of the first to go, and it instantly caused a worldwide shortage in neon gas and a semiconductor shortage because there wasn't raw materials to produce those semiconductors.

And you think back a year or two ago when there was a big shortage in automobile production because they couldn't get semiconductors to finish the autos. A lot of that was due to the pandemic and changes in demand, but also the lack of neon gas available to produce those semiconductors. There are other instances that you can talk about that are sort of remote and you wouldn't think about it affecting your production, but the world has changed so much in the way we source products and find where they're coming from has changed significantly, and as a result of that, it has introduced much more risk into global supply chains.

PS: A lot of our listeners are in condition monitoring roles at the plant, and one of the more popular technologies of the past couple of years has been visual leak detectors. They put a lot of ultrasonic microphones in the tool, you point it at, say, a gas tank and instantly the microphones pick up whether there's an ultrasonic leak. It also visualizes where the leak is. We've heard about a lot of folks getting a return on those investments in that technology when they focus on things like neon gases, other expensive gases. We do know on the on the maintenance side, there's been this focus to make sure you know what you've got and you're protecting it, and that you're focusing on any leaks in those systems, to keep the powder dry when it comes to neon gases and other materials in short supply.

RC: When I first started, many years ago, I worked in a solar turbines production plant in San Diego. Solar turbines, as it was called. At the time I worked in the purchasing department and we used to look up in these big green books called Thomas Register. We'd look up a supplier and their name and address and we’d call them up and ask them for availability on a part, and then we’d hand-type a purchase order and put it in the mail. In those cases, our supply chains short, mostly domestic, printed matter and so forth. Man has the world changed! Today we source around the world and don't think twice about it. We're looking for sources, the best sources, the most economical sources around the world and as a result of that, we've introduced all this risk. In places where there's no transparency in what's happening, that creates all kinds of risk. It's kind of a scary environment for manufacturers or people working on repairs when you don't know when the part’s going to come in. These are things that have really changed the way we work.

PS: Speaking of change, let's talk about the new administration that came into power last week. One of the reasons we're talking is to take a look at some of the economic policies that this administration may either be continuing from the last one or departing from. Talking about policy and not politics, with some of the things the Trump administration is doing when it comes to either tariffs or other policies, how do you see them continuing this reshoring effort?

RC: I think as a general rule, the saber rattling about tariffs has caused a lot of companies to source early. There was a huge jump in port traffic over the past few months for companies that are importing goods in advance of a potential tariff on particularly China, but other countries also importing. So there's been an uptick in that regard for preparing, but I think the bigger issue is there's a lot of talk out there – certainly Trump has threatened tariffs around the world, and so forth – and that causes this uncertainty issue.