Trump administration officials have stoked the narrative of a reshoring boom. They argue that hundreds of companies will bring their production lines back to America. Despite recent bipartisan momentum, a new survey finds that the majority of companies remain afraid to take the plunge. The key reason they don’t is that it’s too expensive. We believe many more businesses will continue to try to find these low-tariff opportunities globally. This continued scramble only serves to further muddy the waters for U.S. manufacturing.
A recent survey by CNBC found that automation will play a much larger role in domestic manufacturing moving forward. Yet economic pressures are leading some companies to hesitate or even reverse course on reshoring. As of today, respondents consistently cite cost as the biggest obstacle to moving production back to American soil. In fact, costs ultimately push 74% of survey respondents to decide against reshoring. At the same time, 21% are concerned about their future ability to find skilled labor.
Automation and the Future of Manufacturing
As businesses and policy makers think about the future of advanced manufacturing in the U.S., automation will have to be a key part of that discussion. A shocking 81% of survey respondents report that they would choose automation over human employees. This new paradigm would make a big difference in their willingness to move operations back home. This trend reflects a deeper, unquestioned current reliance on technology to offset labor costs and provide more efficient service.
This continued trend of automation within factories has sparked concerns over what that means for job access in the manufacturing industry. That’s the big worry, according to Mark Baxa, CEO of supply chain trade group CSCMP.
“The U.S. labor market is a concern when considering movement back to the U.S.” – Mark Baxa, CEO of supply chain trade group CSCMP.
Baxa observes that the outset effects of tariffs have included order cancellations, suggesting risks of consumer spending disruptions to come. This price risk is one reason many companies find reshoring prohibitively expensive. To continue to be profitable without making their payrolls grow with more employees, they are getting pushed or nudged toward automation.
Economic Concerns and Supply Chain Dynamics
Yet this survey surfaces some troubling economic undercurrents driving businesses’ choices to manufacture at home or abroad. BlackRock CEO Larry Fink stated that discussions with various CEOs suggest that the U.S. economy is either on the verge of or already experiencing a recession. As a result, companies are under increasing pressure by falling consumer dollars.
In fact, respondents almost uniformly agree that it will be cheaper to relocate supply chains to other lower-tariff countries. More than half (61%) are convinced that this strategy would lead to greater financial success than reshoring. In addition, 47% of respondents estimate that building a new domestic supply chain would be more than twice as expensive as current operations.
Steve Lamar, CEO of the American Apparel & Footwear Association, opined that tariffs are destroying U.S. businesses. He is heedfully insistent on this last point.
“Supply chains that support millions of U.S. jobs, power U.S. manufacturers, and provide affordable choices for U.S. consumers are now experiencing early signs of damage due to these destructive tariffs,” – Steve Lamar, CEO of the American Apparel & Footwear Association.
Moreover, Lamar warns that the continuation of current tariff policies will be detrimental. They will increase costs for Americans and lead to job losses in key industries.
Layoff Concerns and Consumer Sentiment
In this time of uncertainty, getting companies back on their feet has led to layoffs becoming the first priority. Survey results indicate there is almost no agreement among respondents. Respondents were split on future staff reductions—with 47% planning cuts, but 53% currently laying no one off.
Consumer sentiment can be very important in driving these decisions. Changing consumer behaviors will hurt discretionary products the most, according to the survey’s respondents. In fact, 44% predict reductions in this area. Taking a big hit, furniture and luxury goods—with 19% of respondents listing each category.
The full survey shows that with products coming in under updated tariff rates, most companies intend to increase prices. In particular, 61% of survey respondents foresee having to raise prices on impacted items, making it more difficult for consumers to access essential goods.
Bruce Kaminstein, a member of NY Angels and founder and former CEO of cleaning products company Casabella, emphasizes the struggles of smaller businesses in this environment.
“Small consumer companies that started with an innovative idea do not have the capital to invest in building factories,” – Bruce Kaminstein, member of NY Angels and founder and former CEO of cleaning products company Casabella.
Kaminstein’s comments highlight the precarious balancing act small businesses must perform between innovation and operational viability in an increasingly challenging economic landscape.
The Road Ahead for Reshoring
For those respondents actively looking at reshoring opportunities, expectations for how soon they will implement them are sobering. A significant 74% anticipate a timeline of three to five years or longer before any meaningful progress occurs in reestablishing U.S. supply chains.
As businesses weigh their options amidst evolving economic conditions and ongoing tariff implications, the consensus remains clear: cost remains the paramount concern. As the Industry Week opinion piece explains, tariffs add extraordinary burdens to any reshoring initiative. Together, they illuminate the rapidly-changing and multi-faceted landscape that manufacturers are grappling with today.