Co-authored with Dan Shea*, Managing Director of the Manufacturing & Distribution Practice Group at Objective, Investment Banking & Valuation

Over the past several years, manufacturing has begun shifting away from China (known as The World’s Factory) and back to the United States (aka onshoring) and/or to other countries including those south of the U.S. border (aka nearshoring).

In 2019, pre-pandemic China exported $450B in goods to the U.S., with Mexico in second place at $356B. Both countries are major trading partners with the U.S.


Onshoring and nearshoring are driven by several coalescing factors:

  • Supply chain disruptions underscored by the COVID-19 pandemic
  • Challenges with manufacturing in China:
    • Rising labor costs in China now exceed labor costs in Mexico
    • An aging skilled workforce in China, which is now less productive than labor found in Mexico
  • A changing political environment between China and the U.S.
    • Risk considerations associated with maintaining control over access to goods
    • National security considerations, particularly regarding chips and other tech components/devices, precious metals and pharmaceuticals
    • Intellectual property theft
  • A desire to diversify vendor partners to deconcentrate supply risk


At the same time, manufacturers have seen incentives to increase activity in North and Central America:

  • Closer proximity to end customers with operations in the Western Hemisphere, which results in lower transportation costs and lower required lead times
  • Improved capabilities of Mexican and Central American vendors in terms of skilled output, particularly in electronic goods
  • Improved trade agreements between the U.S. and Mexico as well as key Central American countries


Business owners should consider two key questions: 1) What if my vendors move their production out of China? and 2) Should I consider similar changes to my supply chains?

As your vendors relocate, potential fallout for U.S.-based companies could come from several sources:

  • A need to realign logistics from the vendor’s new location
  • Potential disruption in supplies during a transition
  • The attendant risks inherent in creating and implementing a new supply chain
  • Potential retaliation from the Chinese government


Any company contemplating a change in location for the production of materials or finished goods should take into account the following:

  • Which vendor options outside of China make the most sense
  • Where these potential vendors are located and how they might fit in with an overhauled supply chain strategy
  • The adjusted labor costs and ability to find necessary enterprises with the right skills in the new location
  • How transportation costs from the new location would change
  • Where raw materials for production would come from and how challenging it would be to access secure and cost-effective materials
  • How disruptive a change would be to your internal operations and to your customers
  • How disruptive the transition period would be in itself
  • What the incentives in a new location would be (e.g., tax holidays, workforce incentives, local restrictions and community requirements)


Certain industries will be more impacted than others as this trend continues. Informed by our recent engagements, here are a few examples:

  • Consumer products, including vehicles, computers, food, beverage and apparel
    • In particular, food safety from Chinese production is of paramount concern to virtual brands
  • Electronic products and components, in particular semiconductors, integrated circuits, optical devices and medical devices
  • Material inputs, such as precious metals, mineral fuels and chemicals (including specialty chemicals)


Relocating manufacturing out of China has been picking up steam for a while. Nearshoring and onshoring are hot topics for American businesses. While there are many reasons to consider new suppliers and locations, wholesale changes of this magnitude require significant analysis and consideration.

Indeed, supply chain missteps can be enterprise-threatening and must be carefully planned. Both of our firms are skilled in assisting clients examine such fundamental decisions. Consider reaching out to GHJ’s Growth Planning and Strategic Advisory Team or Objective’s Manufacturing & Distribution Investment Banking Practice Group to learn more about onshoring, nearshoring and how these may be a benefit to your business.

* Registered Representative of and Securities Products offered through BA Securities, LLC Member FINRA SIPC.

David Horwich Thumbnail

David Horwich

David Horwich is GHJ's Growth Planning and Strategic Advisory Practice Leader. He provides his clients with a focused, integrative and transparent approach and has advised clients in all facets of transactional activity, including raising capital and buying and selling their businesses. He has…Learn More