American manufacturers rushing to bring production back home from Asia? Time for a reality check, according to the latest Reshoring Index from Kearney.
Pounded by trade wars and the Trump tariffs, manufacturers are indeed reconsidering their heavy dependence on China as the primary (in many cases only) source of product for Western markets. But to what extent are they actually shifting to domestic production?
The 2025 Kearney Reshoring Index reveals what the firm calls a “gap between reshoring intention and facts.” According to partner and co-author Patrick Van den Bossche, this year’s report found the Reshoring Index “turning back to negative territory, tied to global trade’s most basic drivers — supply and demand.”
Kearney reports that U.S. imports from low-cost regions of Asia grew faster than domestic manufacturing’s gross output. The result was a drop of 311 basis points in reshoring activity, following two straight positive years.
The “hard truth,” says Kearney in the report, is that “while CEOs are more committed than ever to reshoring, the domestic manufacturing ecosystem is still playing catch-up, so the next phase will require, not just capital, but coordination.”
Shay Luo, partner in Kearney’s strategic operations practice and another co-author of the index, says the results caught the firm by surprise as well. All surveys show continuing “strong interest” by top American executives in bringing production closer to home. Yet current uncertainties surrounding the economy, governance and trade policy are causing a delay in investment toward that end.
“People want to wait until things are more settled,” he says. Ironically, the same geopolitical tensions that drove American manufacturers to consider reshoring in the first place are now causing them to press pause on the necessary investments.
Indeed, reshoring is no quick fix. The time required for obtaining permits, building or refurbishing plants, and attracting a sufficiently skilled workforce results in “huge delays” in making the move a reality, Luo says. Setting up, for example, a semiconductor plant in the U.S. entails years of effort and investments running into the billions of dollars.
Meanwhile, despite the Trump Administration’s slapping tariffs on virtually every U.S. trading partner, imports from Asia increased by 10%, or $90 billion, over the prior 12 months. Categories experiencing significant import growth included computers, electronics and electrical equipment.
Luo says the surge was in response to inadequate levels of U.S. domestic production. “To fill demand,” he notes, “they have to find supply somewhere. China is still the best answer to a lot of companies looking for production capacity.”
Producers had been absorbing the higher tariffs in an attempt to keep market prices down — an effort that the most recent economic data suggests is coming to an end. Companies that stockpiled large amounts of inventory in U.S. warehouses in anticipation of the tariffs now must reach back overseas for new product as those stock levels are depleted, and the year’s peak shopping season approaches.
“All the tools are exhausted, and the tariffs are in effect,” Luo says. “We’re going to see the impact very soon.”
The growing importance of Mexico as a manufacturing center had fueled hopes of that country providing a nearshoring alternative to production in China. But capacity in Mexican plants is being “tapped out” as well, Luo says. And increasing pressures on Mexico’s labor supply and natural resources are putting a damper on production growth in that country.
As a result, Mexico has been unable to fill the gap in demand for product by U.S. consumers left by the domestic shortfall. “We saw manufacturers reverting to sourcing from those distant Asian low-cost countries and regions [manufacturers] had relied on in the past,” said Kearney partner and index co-author Omar Troncoso.
If current geopolitical and economic uncertainties persist, Luo predicts, businesses will continue to hold back from making heavy investments in domestic production over the next year. Their reluctance could be further motivated by a drop in consumer confidence.
According to Kearney, “The next phase of reshoring will be defined by hard choices about what to produce, where to invest, and how to compete in a fragmented, fast-moving world, knowing that manufacturing ecosystems scale best when market signals are strong and clear, capabilities are in place, and supply chains can flex and adapt with speed and confidence.”