What Would It Take to Reshore US Manufacturing?

The following article first appeared in the Industry Insights section of RSM’s website. It is reposted here with permission.

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A central goal of the current U.S. administration is to bring back and expand domestic manufacturing and rebalance global trade to reduce the country’s trade deficits with key partners.

Since January, the administration has pursued this agenda by introducing sweeping tariff measures, including broad-based 10%−25% tariffs on imports from Canada and Mexico that do not fall under the U.S.-Mexico-Canada Agreement; sector-specific tariffs on steel, aluminum and autos; 10% reciprocal tariffs on most countries; and a 145% tariff (reduced to 30% in May) on Chinese goods, alongside the elimination of the de minimis exemption for low-value imports from China.

These measures raised the average tariff rate on imported goods from 2.5% in 2024 to over 20% as of the end of April 2025.

A 90-day pause on higher reciprocal tariffs and a temporary exemption on certain goods aim to give room for negotiation, but it is evident that an environment of significantly higher tariffs is intended as a long-term policy.

The scale and unpredictable rollout of these policies have already begun to disrupt global supply chains.

Companies have stockpiled inventories despite demand uncertainties, while market volatility is delaying business decisions, halting capital investments, and dampening consumer confidence.

The broader economic impact across all industries is far-reaching.

Tariffs are creating demand uncertainty, higher costs and margin pressures for businesses, while also fueling inflation and causing supply disruptions for consumers.

These developments raise key questions: Will protectionist trade measures truly boost domestic manufacturing? Do such measures justify the risk of stifling growth and investments?

Bringing back domestic manufacturing is a worthy objective, but tariffs alone won’t make it happen.

Reigniting domestic manufacturing will require a holistic approach that builds industrial capacity through stable investment, regulatory, and market conditions.

Other key elements include a skilled workforce prepared for the new realities of smart manufacturing ecosystems, access to raw materials and components, upgraded energy and transportation infrastructure, and reliable trading partners and export markets.

At the same time, not all manufacturing needs to return; global trade based on trading nations’ comparative advantages still has a place in a balanced global economy.

Historical Context: How We Got Here

The current global manufacturing footprint and trade imbalances are rooted in structural shifts over the last two decades.

Since China entered the World Trade Organization in 2001, the U.S. and other countries have shifted production to low-cost countries.

While this allowed countries to benefit from an abundant supply of goods and lower prices for domestic consumers, it hollowed out the domestic industrial base and contributed to growing trade deficits—including a record $1.2 trillion goods trade deficit in the U.S. in 2024, of which approximately $300 billion was with China.

In recent years, the vulnerabilities of global supply chains have become increasingly apparent, further justifying the case for reshoring some domestic manufacturing capacity.

But this effort should focus on strategic, high-value sectors that arecritical for national security and economic resilience, such as semiconductors, advanced machinery and electronics, clean energy, and pharmaceuticals.

Growing these industries will support high-paying jobs, reduce U.S. dependency on other countries, spur the development of intellectual property, and drive the build-out of the entire ecosystem of the technology, service, and adjacent manufacturing sectors.

What Needs to Happen to Make Reshoring Successful?

Effective reshoring requires addressing significant barriers, including:

• High labor costs
• Skilled-workforce shortages
• Outdated infrastructure
• Intricate transportation and logistical networks
• Dependence on foreign-sourced raw materials
• The complexities of globally integrated supply chains

Another challenge is that a strong U.S. dollar makes domestic production and export more expensive.

Tariffs, while intended to protect domestic producers, may exacerbate these challenges by raising input costs and suppressing economic growth, impacting the demand for goods and creating market volatility that makes long-term planning difficult.

Constructing and commissioning a production facility with new supply chains takes years of planning and requires a greater level of certainty and long-term predictability.

Midsize businesses need to balance sustained production, sales, and profitability while reevaluating sourcing, pricing, and production.

Middle market manufacturers may find it especially hard to navigate current trade volatility.

Without the fiscal capacity and pricing power of larger players, midsize businesses need to balance sustained production, sales, and profitability while reevaluating sourcing, pricing, and production strategies.

Many are caught between rising costs and uncertain policies, underscoring the need for scenario planning, partnerships with suppliers and customers, and advocacy for trade policies that would support the long-term competitiveness of North American manufacturing overall.

Bolstering domestic manufacturing would require a holistic, coordinated policy strategy that includes:

• Maintaining strong conditions for entrepreneurship and a stable investment environment, including a sound financial infrastructure, predictable capital costs, efficient tax systems and a regulatory environment that incentivizes domestic investments
• Robust investments to modernize infrastructure, especially in energy, transportation and logistics hubs, to improve supply chain efficiency
• Rapid workforce development for highly automated and technology-based manufacturing, through STEM-focused educational programs, trades training and upskilling programs
• Reliable, predictable and rules-based international trade frameworks (with any trade restrictions allowing sufficient time for manufacturers to adjust their supply chains)
• Incentives for research and development and the domestic sourcing of critical inputs

On the business side, companies should take proactive steps to adapt to evolving trade conditions, assess their supply chain strategies, and understand the viability of reshoring or regionalizing parts of their production capacity. Proactive measures include:

• Identifying country-specific risks and vendor concentration vulnerabilities within the sourcing network and overall manufacturing footprint
• Assessing the full landed cost of imported goods/materials, factoring in new tariff levels, logistics, and compliance and exploring alternative sourcing strategies and associated costs
• Developing dynamic tariff planning strategies by monitoring policy developments, considering demand forecasts when managing inventory levels, and, where applicable, leveraging trade regimes such as bonded warehouses, foreign trade zones or duty drawback programs
• Modeling pricing and cost-sharing strategies to assess the feasibility of passing additional costs to customers, as well as renegotiating long-term contracts and cost-sharing arrangements with vendors
• Reevaluating global supply chains and distribution models for international markets to determine a cost-efficient flow of goods for both the import of inputs and the export of finished products
• Evaluating long-term shifts in supply chains and production and distribution footprints to be prepared for rapid changes, tariff increases and other trade risks
• Integrating scenario planning into decision making and preparing for various economic and policy factors, including tariffs, labor availability, access to and cost of input materials, permitting, and tax policies and other regulations

The Bottom Line

Competitive manufacturing and trade should not be a zero-sum game; efficient global trade can coexist with strong domestic industrial policy.

Tariffs may offer short-term protection, but rebuilding the U.S. manufacturing base will require a long-term strategy that includes a stable policy and economic environment conducive to long-term planning; modernization of infrastructure; skilled-labor development; and targeted support for high-value sectors.

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About the author: Irina Im is a senior manager in the business tax practice at RSM Canada working with Canadian and multinational corporations, both publicly and privately held.