Globalisation has stalled and a policy backdrop aimed at reinforcing national security and supply chain resilience could shift production patterns and entrench this slump.

It is difficult to discern if widespread reshoring is already taking place. Foreign Direct Investment (FDI) data do not yet point to a marked shift, but these are lagged, and investors waiting for concrete evidence may miss out.

Mexico has witnessed a surge in non-residential investment and captured a larger share of US trade since President Trump’s trade war against China. India has also tripled its exports of electrical goods and appears well placed to benefit from reshoring.  

US tariffs have had a notable impact on bilateral trade flows, with Vietnam another winner. But it is tough to parse out structural change from trade data. 

We remain sceptical that DM policy (be it national security or carbon border taxes) will be sufficient to drive ‘onshoring’ of manufacturing back to DMs. But – alongside Mexico – it could push investment away from China and into the rest of Asia. 

APAC’s centrality within the global trade network confers a strong starting advantage, while there is no need for these manufacturers to ‘nearshore’ to gain access to one of the fastest growing consumer markets in the world: that of China and emerging Asia.

US policy will be important in determining the pace, extent and composition of shifting production patterns and in upcoming work we will consider how a Biden or Trump victory this year would impact the outlook for reshoring and globalisation more broadly. 

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