June 2, 2025

Hi everyone, my name is Taylor St. Germain with ITR Economics, and welcome to this edition of TrendsTalk. We at ITR, your apolitical and unbiased source of economic intelligence, and today I wanted to talk about this onshoring, nearshoring foreign direct investment trend.

Now, of course, this topic is getting a lot of coverage as a result of tariffs. We haven’t seen that same relationship between tariffs and manufacturing activity. What I’m referring to is this idea that tariffs bring manufacturing back home. Well, when we look at the data, we can overlay a series like manufacturing production in the US with tariffs. And what we’ve noticed is that despite more and more tariffs being in place over the last, I’ll call it 15 years, we’ve still seen a general decline in manufacturing.

However, the US does remain the number one destination of foreign direct investment. So if it’s not tariffs over the past decade and a half that have brought manufacturing back home, then why do we still expect to see this onshoring and reshoring to the US happen in the future? Again, tariffs can be a part of this in the future. I’m not making a forecast of if tariffs will or will not bring future manufacturing back.

But instead, I wanted to focus on the reasons that businesses are actually citing on why they’re investing in the US. And tariffs aren’t on this list. It’s instead of a lot of other competitive advantages that the US has. So again, historically, more tariffs have not meant more manufacturing. But yet we are seeing more foreign direct investment in the US than ever before.

The Reshoring Initiative does a great job at capturing the actual reasons cited by businesses on why they’re investing in the US. I’ll name off a few here. I have the list of the top 20. Number one on that list is government incentives. 720 businesses cited that their reason for reshoring or onshoring back to the US was government incentives. Think of things like the CHIPS Act. That is the number one reason we are seeing businesses come back to the US, at least as of the end of 2023.

Number two on the list is proximity to customers in the market. So seeing these supply chains closer to where your customer base are. Number three was skilled workforce and availability and training. Which again, as we’ve talked about the 2030s, even though we don’t have the most attractive population trend moving into the future, we’re not some of the areas that have declining populations like Western Europe and China.

So there’s a few others on the chart. It’s learning lessons from the supply chain interruptions of the pandemic. It’s the infrastructure that we have here in the US. It’s branding made in the USA. 174 businesses cited that their reason for onshoring back to the US was just that, image and branding being made in the USA.

We also have automation technology high on the list, raw material cost, 3D printing. The list goes on. But again, my point here is to say I think often we give tariffs too much credit for the reason this onshoring and reshoring is happening when there’s so many other major competitive advantages that the US has compared to many other regions around the world. So when you’re thinking about marketing your company, look to some of these factors to highlight as your competitive advantage.

Now another really encouraging trend that I’d love to cite for you all is not only are we seeing more foreign direct investment in the US, we’re also seeing businesses here at home investing more in the US than they ever have before. We look at a series like Gross Private Domestic Investment from a real GDP standpoint. That latest number is $4.336 trillion. That’s how much US companies are investing here at home. That is a record high.

You’ve heard us, our economists at ITR, say the US continues to be your best bet forward, whether it’s onshoring, reshoring, looking at the supply chain. And the data continues to support that. Again, I know tariffs create a little bit of a challenge, but there are so many reasons businesses are coming back to the US. And we here in the US that are already at home are investing more in ourselves than ever before.

I don’t know about you all, but that’s really good news for our country here in the United States. And it’s one of the reasons we continue to say the US will be your best bet forward. Take the time now to retool these supply chains. Focus on the US. Understand again that we have five consecutive years of GDP growth in our forecast as we look at the second half of this decade. It’s a great time to be here in the US.

It’s a great time to be an American company. And the future looks very bright. And I think that’s a message that again is supported by data that we all need to hear right now in the face of all of this uncertainty in geopolitical turmoil.

I hope you found this information helpful. Thanks for joining me on this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you listen to your podcasts, and I look forward to seeing you all in the next one. Take care for now.