Key Takeaways

  • 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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