- Many US companies are shifting some of their supply chains back to the US.
- It's in response to the supply chains disruptions companies have faced in recent years.
In the years ahead, American shoppers may be able to buy more goods made in the USA — but that may mean paying more for them.
Apple, Walmart, General Motors, Intel, and Lockheed Martin are among the corporations that have taken steps to "reshore" or "onshore" their supply chains, which consists of manufacturing more in the US or buying more from US suppliers.
It's the result of substantial product shortages as the pandemic and Russia's invasion of Ukraine threw supply chains into chaos, and part of a broader economic "decoupling" between the US and China that dates back to the trade wars waged during the Trump administration.
National security and human rights concerns are among the reasons the US has begun cutting ties with China, for instance, while the energy crisis sparked by Russia's invasion have led businesses and countries to seek energy independence.
The headaches US corporations have faced are leading more of them to bring their supply chains closer to home and more under their control. According to a recent survey of CEOs and investors by advisory firm Teneo, 91% of CEOs said they are preparing for deglobalization. Just under half (46%) said they were adjusting supply chains, and around a third (32%) said they were onshoring their workforce.
That could generate American jobs. The downside, however, is that consumers may ultimately be forced to pay more for a Made in America economy.
A November Goldman Sachs report, for instance, said reshoring could have "inflationary repercussions," and that among the efforts US companies are taking to improve supply chains, "reshoring poses the risk of boosting prices."
For example, earlier this month, Taiwan Semiconductor Manufacturing, the world's biggest chipmaker, announced it would be opening a second factory in Arizona, making it the largest foreign direct investment in US history.
"These investments are helping us build and strengthen the supply chain here in America," President Biden said in a speech at a TSMC facility, adding that "American manufacturing is back."
But earlier this year, TSMC's founder Morris Chang said the US's efforts to increase domestic chip production would be "a wasteful, expensive exercise in futility" because "manufacturing chips in the US is 50% more expensive than in Taiwan."
This means Apple, for instance, which has already pledged to be the Arizona factories' largest customer once they go online in 2026, could begin facing higher costs, which could eventually translate to higher iPhone prices for American consumers.
Overseas manufacturing has created cheap products for Americans
Over the past two decades, cheaper overseas manufacturing costs in countries like China have driven down prices for goods like smartphones, TVs, and computers, University of Michigan economist Mark Perry previously told Insider. As of July, prices for clothing, toys, and TVs had fallen 2%, 72%, and 98%, respectively, since 2000, per Perry's analysis of Bureau of Labor Statistics data.
"The intense global competition for tradeable goods like clothing, footwear, electronics, TVs, etc. will ensure that the prices for those goods will continue to be very, very affordable for US consumers," Perry said.
But if more companies shift their supply chains closer to home, this could slowly begin to change. While Apple, for instance, may be "happy to pay a little bit more" to ensure supply chain diversity, as SemiAnalysis's Dylan Patel previously told Insider, it could eventually create price pressures that get passed on to American consumers.
Subsidies and automation could help keep US manufacturing competitive
In the face of these price pressures, there are some ways the US and its corporations could try to keep prices of US-made goods in check.
The TSMC factories, for instance, will be partially subsidized by the US government through the CHIPS and Science Act, which could help make production 15 to 20% more expensive, versus the 50% Chang said it would be.
Additionally, some onshoring companies "looking to protect margins" will embrace automation to cut costs, Geoffroy de Carbonnel, VP Product Management and Strategy at Oracle, told Insider. While some jobs may go by the wayside as a result, de Carbonell says he believes automation will create "new, yet different jobs."
"Reshoring won't replace jobs that were lost over the last five decades, but it will ultimately be net-positive in terms of job creation," he said.
Ultimately, however, strong job creation in the US may be what forces some reshoring businesses to raise prices in the years ahead. There are over 10 million job openings today, and an aging population and lower immigration could cause the labor shortage to persist in the years to come.
If reshoring companies have to raise wages to attract workers, they may decide to raise prices even further to protect their margins.