Podcast: Reshoring in 2025 – strategies for navigating tariffs and trade uncertainty

Key takeaways

Tariff uncertainty is stalling manufacturing investments, forcing companies to adopt multiple contingency plans.
Workforce shortages and higher skill demands are major barriers to U.S. reshoring and factory site selection.
Contract manufacturers must focus on total cost and lead times while actively listening to customer needs.
Cross-functional collaboration and having Plan B, C, and D are essential for navigating rapid market shifts.

In this episode of Great Question: A Manufacturing Podcast, Plant Services chief editor Thomas Wilk checks in with Rosemary Coates on how reshoring efforts in the U.S. are going since January. Coates is the executive director of the Reshoring Institute and has experience in global supply chain management consulting at Blue Silk Consulting. She has more than 30 years of experience in supply chain, reshoring and nearshoring, and is the author of several books.

Below is an excerpt from the podcast:

TW: It has been some six months, hasn't it?

RC: Yeah, like no other six months.

TW: Well, I want to start with something we talked about in January, and when we talked at that time, we were sort of looking forward to what this new administration might hold for reshoring manufacturing. You said there had been already a significant impact in uptake and reshoring interest and to quote you, you said “phones were ringing.” So, my question right now is: are the phones still ringing with you and the institute, and if so, what are companies looking for help with these days?

RC: Yeah, for sure, they're ringing! A lot of companies though now are in a situation where they're trying to figure out what to do about the tariffs. Since the Trump administration began, the President has signed 143 Executive Orders related to trade. And trying to keep that stuff straight, what's on, what's off, what the tariff rate is and so forth, has really gotten to be extremely complicated and tough to keep up with for sure. So yeah, a lot of companies are reaching out to us for help and to try to rethink their strategies.

TW: Interesting. Yeah, the on again off again business has been tough for reporters too. We keep a running digest of activity on Industry Week, and I found a couple of tables here and there of legal firms keeping track of what's on and what's off. What's on right now, from what I can remember, is 10% across the board with a couple of higher rates here and there, with some things maybe pending in July, right?

RC: Yeah, so the original tariffs went into effect about three months ago. Those were the big tariffs, the 145% on China and 46% on Vietnam, and you know, just big tariffs with big numbers. And then those were put on pause until July 9. If that pause is lifted, we may go back to these giant tariffs again, or there may be a delay or there may be another pause – we just don't know. And it’s really hard to tell whether this is policy or it's more performative politics.

It's a negotiating tactic that Trump likes to use. In the meantime, it's like a bullwhip effect in business. I mean, it's like on again off again, you know, what do we do? How do we plan for this? And that's the anathema of most businesses, is unpredictability and not knowing what to do.

TW: One report I read was looking at manufacturing construction spending having leveled out year over year in April, after going up pretty quickly year over year in 2024 close to +20%. The past year, it's at about +1% and the reasons people gave were: high interest rates, increase in construction material prices, and “the overarching economic uncertainty”, right, like “what the heck is going to happen with policy?” Is that the kind of help that people are asking you for? To ask how to navigate this or what the institute thinks might be next?

RC: Two years ago, I was talking about the manufacturing super cycle. We have had so much infusion of capital into the industrial marketplaces, and we were seeing a lot of building, a lot of planning for the future and so forth.

Now I think there's so much uncertainty, that people are stuck. So, for example, we did a project for the state of New York where they asked us to interview 18 executives, all at the C level, so CEOs, COOs, and chief supply chain officers across America. We did that across geographies. We interviewed these high-level executives and medium-sized businesses and some large businesses. And we asked them, what are you doing now? How are you responding?

And almost to a person, they told us they were doing nothing. They were making no investments, they were not opening new factories, they were not hiring – nothing until the economy stabilized a little bit. But in the background, they were feverishly working on plans. We always encourage our clients to have a plan A, B, and C. Because of the instability of the world right now, you never know when a new war is going to break out or a new pandemic or something, so you need to have a lot of alternate plans. And that's what these executives told us, that they were actually working on multiple plans, multiple alternative ways to address the variability in the environment right now.

So, they're stuck, they're not making investment in new properties, they're not building anything right now. But hopefully, when things stabilize and we don't have these wild swings and tariffs and these crazy geopolitics going on, then they'll put the foot on the gas and we'll see some big investment going on.

TW: You mentioned the super cycle when it came to plant construction in the past couple of years. That was driven in part by the three big acts from the Biden years: the Inflation Reduction Act, CHIPS and Science Act, and the Infrastructure Act.

Do you have any sense of how willing the Trump administration is to continue to support these acts? Because my sense is that finally, two years down the line, money is really starting to flow. People have gotten through the application process; the grants are there, the investments are there. I was curious to know what you heard about will this continue?

RC: The acts and the funding were passed by Congress, and I think, you know maybe 1/3 to 1/2 of that funding has been started to be distributed. I don't know that it's all gone there, but it's in process. The rest of it, the Trump administration has said they're going to look at every project and decide whether to go forward or not. Now, whether they have the authority to do that, I don't know, because these were acts passed by Congress. It may end up in court if they decide to stop a project, for example, for whatever reason, it may end up in court.

An influx of funding like that is a real boost to the economy because it lights a fire under certain industries. Let's take semiconductors for example. There are semiconductor plants that are in the process of being built all across the Southwest and Arizona, Idaho, Texas, New Mexico, Ohio, and upstate New York. These are big multibillion dollar, fully automated semiconductor production that take 5 to 10 years before they'll come online.

But directing money for investment that way also lights a fire under the entire supply chain. It isn't just the factory or the end product. It's every design company for semiconductors. You know, I live here in Silicon Valley, and I've had a lot of clients in semiconductor design and first article production. All of those people get a boost, the raw materials manufacturers, they get a boost. All that automation and equipment in the factory, all of that gets a giant boost forward, so it affects the entire supply chain when there's money like that infused into the economy. Stopping it is going to, I think, put the brakes on some of that.

TW: OK. Let's look at the other things that the Trump administration is doing beyond tariffs. What are some of the initiatives that you know they're pursuing or have pursued to help drive this reshoring effort and attract manufacturers back to the U.S.?

RC: I think part of it is the narrative. I'm not sure there are that many people in the Trump administration that have actual hands-on manufacturing experience. I think they're lacking, but they are telling a story about manufacturing and driving it back, and that shifts the narrative and the broader business environment. It also gets a lot of companies thinking about the possibility of bringing manufacturing back, and that's an important part of moving forward.

Being enthusiastic about bringing manufacturing back I think is great. It really helps us a lot, but you also have to take a dose of reality. Honestly, we're not going to get the $0.23 an hour T-shirt production back. We're not going to get thousands of people sitting on plastic stools for 12 hours a day at a sewing machine or assembling iPhones. That’s just not going to happen. We don't have those kinds of workers in America, and we don’t have the minimum wage rates structured in a way that could economically support that kind of manufacturing.

And here's a big one that I hadn't been too aware of: we don't have the electrical infrastructure to support that amount of manufacturing. I talked to an investment banker a couple weeks ago in New York City, and he's in the in the power generation and power industry. And he said, places like the Northeast U.S. just could not possibly handle more than a few percentage point upticks in manufacturing in that area. There just isn't an electrical infrastructure to handle it. And he said that's pretty much the case across the country. Not that it couldn't be fixed in 10 years or so, but it's not going to happen by September.

TW: Yeah, you know, and the timeline is something I think everyone wants to wave a magic wand and compress. And again, even with the acts in the Biden administration, we're seeing 2-3 plus years now, projects just starting to get started, which will open years later on. =

This whole power aspect is really interesting too, because you're not just looking at new manufacturing plants, you're looking at data center production, too. Those benefit from a couple of reliability engineers who are redeveloping new best practices for data center maintenance, because this is happening so quickly.

RC: Data centers are sucking up all the energy for sure, these giant massive data centers that are needed for AI development. AI is moving so quickly and developing so quickly that the demand for electricity is super high right now, and it's all going there because there's more money to be made in that market.

TW: Let me ask you about the workforce issues. For the rest of our conversation, I want to differentiate between larger manufacturers / larger OEMs and smaller contract manufacturers, and the way that reshoring impulses are driving both of those slightly differently. For example, for larger OEMs, I’ve read that workforce availability is the number one criterion for site selection, like ‘where is the labor?’ And not only is it the number one criterion, it's also the number one bottleneck to getting these plants going. Is that also what you're seeing? Are you getting asked for help from companies to solve that problem?

RC: We work with companies that are also trying to build a new factory in the U.S. or look for a new location. We do location consulting also, and we often find the least expensive places to manufacture are in the rural South and in other places that have fairly low populations. That's where the minimum wages are the cheapest and where it looks like the tax rates are lower and they look like a great advantage.

But if you go to some of these places, there aren't any workers! I worked with a company that makes recycling equipment last year. They’re in a rural part of New York and the woman that runs the plant, said: “Sometimes we have to just shut down because we don't have any workers – we can't find them.” There's no big city within 50 miles or so of where they are and so they can't attract workers from other communities. There just aren't any people. So that's one of those things where we coach our clients from the beginning. It’s great that there's low tax rates and low cost in some of these places, but if you can't run your plant because you don't have any people, it's not going to help you.

Instead, what we guide our clients toward are suburbs of big cities. A good example is Cincinnati. It’s right on the Ohio River, and within 10 miles you're into some major population areas of Kentucky. So, to locate on the Kentucky side of the river, you're close to the big city, you have more people available, and there's some economic things that you would consider. That's just an example, but there are plenty of places where you might consider locating, maybe a suburb of Atlanta, something like that, so you are within reach of a bigger population center and more potential employees.

But that's only part of the problem. The other part of the problem is that the workforce demand has changed. In today’s environment, if you go into a factory today – I live in Silicon Valley, so there's people in bunny suits and all decked out and anti-static equipment and so forth – but most manufacturing plants today are a pretty clean operation overall. There are people using computers: you may be assembling something and then you hit a button, or you upload the inventory or something like that. The workers use computerized technology.

Automation has changed. Now you're working with a machine tool. Instead of putting pegs in holes, you're now running the robot that does that. The skill level, the education level, the training level for workers has completely changed. And that's part of the problem of why we have a worker shortage.

Sure, there's a lot of people out there on the street that you could hire that have no skills. They don't know how to operate a computer, or have never seen a robot before. But that's not going to help you. You need skilled labor. You need people that have what I like to call a crossover skill set, usually at the Community College level. That's where they go for training. By that time, hopefully they get some computer literacy, they get trained on machine tool handling, but they're also getting a basic, fundamental college education in writing skills, mathematics, and so forth.

That's what we need. Those are the kind of workers that will fill the jobs that are currently open, and the jobs in the near future.

TW: You know, when I go to the IMTS trade show here in Chicago and shows like FabTech, there's usually some sort of student area, but they put it in the basement, away from the main trade show floor, and I keep thinking “you're making a huge mistake here. You need to put that stuff front and center and integrate it in with a lot more of the booths to show that this next generation is critical towards what you're trying to develop and manufacture.”

RC: I have five grandkids and one of my grandsons does everything on his iPhone. Right? I mean, everything! He does his banking, he looks at spreadsheets, and I'm like, “how can you do that?” But this is the kind of movement forward and the change in the environment that we need to pay attention to. We need to teach our students not only about the bigger business environment, but how to use the tools that they're used to and transform that skill level into operating in a manufacturing environment.

TW: Let’s finish our conversation with a little time spent on contract manufacturing, the smaller businesses in this world. I read a really interesting report which talked about the value prop that contract manufacturers thought they were bringing to their customers versus the value prop that was actually winning them business.

For example, a lot of these smaller manufacturers based in the U.S., were pitching their services based on quality, but it turns out their customers from the larger OEMs and others were more focused on total cost of ownership and shorter lead times, which is directly related to this issue of offshoring and reshoring. What's your sense of what the contract manufacturers can do these days to help stay alive and stay competitive while everyone waits for the larger companies and larger plants to reopen and become new customers for them?

RC: A critical skill here is listening. Talking to customers but actually listening about what they're trying to solve. So instead of marching in and saying, “here are all the things that we offer and this is what we do”, listen to what the customer is telling you about what they need.

If they're saying they're looking at time to market or total cost of ownership, it's a little bit of a different spin, and that's what smaller contract manufacturers need to be delivering. I think that's a mistake not only small contract manufacturers make, but it's a common mistake for all kinds of business providers.

I’ve been in the consulting world for a long time and I'm seeing these consultants come in and say, “I know all the answers, I'm going to come in and tell you how to do stuff,” instead of listening to what the client is saying about what they need or what their goals are. You have to think about being a better active listener and to ask the right questions and then try to provide solutions that meet those questions or inquiries.

TW: Anecdotally I'm following somebody on Threads who works for a plant in central Tennessee and she works for a contract manufacturer. She had watched as her plant was reducing the number of shifts over the past four or five months in response to the tariff uncertainties. A lot of her fellow coworkers just didn't want to see what was happening, didn't want to listen to the tea leaves, so to speak.

I believe she just took a new job within the last one or two weeks at a different place. But, she could sort of see that this one plant wasn't doing its best job listening on what their value was to manufacturers. And she's like, “We’re down from three shifts to two. I'm not going to wait to go from two shifts to one. I'm going to try and find somewhere else that's listening.”

There's a workforce issue that comes into play here too. If you want to keep the workers, you’ve got to listen to what your customers are saying.

RC: I mean, it'd be great if we could all live in the comfortable past, but that's not the business environment. You have to constantly be thinking forward. What's new? What direction is business going in? What new problems are they addressing? I think paying attention to future trends, listening to trendsetters and so forth is a very important part of providing the correct solutions for clients and for customers.

TW: Hopefully we can talk again at the start of next year, but until we talk again, let me close out on this question. What are one or two things you would tell manufacturers, it could be different for large versus small, on how to get through the next six months when you're forced to make decisions to survive? Is there anything you're telling people to do or a strategy to follow? Because people just can't stay still forever, right? Otherwise, you tread water forever and you're going to sink. So, you have to do something.

RC: In general, we have two things that at least I talk to my clients about all the time.

Number one is to think cross functionally. We haven't necessarily done that much of that sort of thinking and development in the past – executives set a strategy and then the lower levels execute that strategy and so forth. Today's environment requires that you have cross functional integration and thinking about how to solve a problem. For example, using the tariffs: in the past that was the assignment for trade compliance people. In today's environment, that same CEO has to talk to the purchasing people to understand how tariffs are going to affect cost of products. They need to talk to the sales staff to understand if they have to pass on tariff rates to customers, will that affect demand? They need to think about finance, how the future is going to look and what the pathway is. That’s an example of bringing cross functional people to the table, and making decisions based on inputs from various parts of the organization. That's really important, and that's a clear change from the way we've done things in the past.

The other thing that I always, always tell my clients is: never just pursue one avenue. You need to have two or three other alternate ways in your back pocket. If you’re manufacturing in Poland, and now you've got to deal with a war in Ukraine and with what’s going on in Eastern Europe, you have an alternate that you could maybe move manufacturing to Mexico. If you're manufacturing in China and you have a trade war, then you need to have a plan in your back pocket to maybe move some of that manufacturing to Indonesia or Vietnam. If you are manufacturing in Houston and now you have a huge hurricane and there's damage to your plant, you need to have something in your back pocket to start building things in Salt Lake City within a few weeks.

That forward thinking, that “I have plan B, C, D” and possibilities in your back pocket, instead of trying to scramble after an emergency happens, is really the way to go. Business is moving at a very fast pace these days. If you sit still, you're going to lose your market.

TW: Rosemary, thanks again for being here and hopefully we'll talk to you in a few months, and we'll find out what the next challenge is.

RC: Yeah, every day there's a new challenge for sure. Well, thank you, Tom. I appreciate it.

About the Podcast
Great Question: A Manufacturing Podcast offers news and information for the people who make, store and move things and those who manage and maintain the facilities where that work gets done. Manufacturers from chemical producers to automakers to machine shops can listen for critical insights into the technologies, economic conditions and best practices that can influence how to best run facilities to reach operational excellence.