The past five years have seen a substantial uptick in reshoring activity as companies try to build more resilient supply chains that can resist unexpected disruptions ranging from global pandemics to trade wars and geopolitical instability. As supply chain leaders look ahead to 2025, it’s easy to wonder how a new presidential administration will impact the reshoring trend. In this article, we’ll discuss how expected policy changes could impact the ongoing onshoring efforts by U.S. businesses.

3 Reasons Why Reshoring Ramped Up

Reshoring/onshoring isn’t a new phenomenon for U.S. business leaders. Trade magazines and news outlets have speculated on and off about a manufacturing renaissance since the turn of the century, as the establishment of China’s middle class and rising wages in the popular outsourcing destination made it less cost-effective. But the reality was that manufacturing in other countries was still more affordable, and reshoring back to the U.S. was expensive and time-consuming.

Spurring notable action on reshoring required a perfect storm of disruptive supply chain elements. Here are the main factors that turned reshoring from a consideration to a reality:

1. During the first Trump administration, a trade war with China accompanied by a general rise in overseas production costs suddenly made decades-long offshoring strategies less appealing for U.S. businesses.
2. Following that, the COVID-19 pandemic showed companies what can happen when an unexpected event cuts them off from their far-flung suppliers. That’s when we began to see the popularization of the term “supply chain resiliency,” as businesses realized that shortening supply chains could help to ensure business continuity.
3. Finally, the Biden administration massively incentivized reshoring for renewable energy, green tech, and various other industries through the Inflation Reduction Act (IRA), CHIPS and Science Act, and Infrastructure Investment and Jobs Act.

These factors combined have made reshoring efforts into a key demand driver for industrial real estate over the past few years.

What Happens Next for Reshoring

One of the early executive orders from the Trump Administration put a hold on disbursements for IRA and Infrastructure Investment and Jobs Act funding, which will negatively impact various key reshoring drivers, specifically targeting green manufacturing like solar panels and batteries. This immediate action to rescind incentives for certain industries to reshore raised a lot of concerns and red flags in the industrial real estate market, which has benefited from these policies.

However, it’s important to consider reshoring in the context of the administration’s other goals. Upping tariffs on everyone from China to close trading partners like Canada and Mexico will drive up the cost of importing goods. The administration believes this will spur continued interest in reshoring across industries by making the import of goods and components too costly for U.S. businesses. Reshoring should remain a strong demand driver for commercial real estate as companies minimize their interactions with foreign suppliers and seek domestic sources.

Furthermore, reshoring is costly and takes a long time. Unless they are very early on in their reshoring journey, it’s unlikely that businesses that have already committed to reshoring would pause or abandon those efforts in reaction to short-term policies and risk losing the investment they’ve already made.

The reasons a company may pursue supply chain resiliency will inevitably shift with the new administration, but resiliency itself is expected to remain a key goal for U.S. supply chain leaders as they seek to control costs and mitigate disruptive elements.

If your business is considering reshoring production or logistics assets but isn’t sure how recent policies will impact your decision, talking it over with an experienced industrial real estate broker can help. Feel free to reach out to us if you would like to talk through any concerns you may have about ongoing reshoring efforts or upcoming plans.

About Phoenix Investors

Founded by Frank P. Crivello in 1994, Phoenix Investors and its affiliates (collectively “Phoenix”) are a leader in the acquisition, development, renovation, and repositioning of industrial facilities throughout the United States. Utilizing a disciplined investment approach and successful partnerships with institutional capital sources, corporations and public stakeholders, Phoenix has developed a proven track record of generating superior risk adjusted returns, while providing cost-efficient lease rates for its growing portfolio of national tenants. Its efforts inspire and drive the transformation and reinvigoration of the economic engines in the communities it serves. Phoenix continues to be defined by thoughtful relationships, sophisticated investment tools, cost-efficient solutions, and a reputation for success.