“-Shoring” refers to a family of strategies through which firms and states relocate production, sourcing, or services in response to economic, political, or security pressures.

The prefix attached to the term (e.g re, friend, or near) is indicative of the new location. Collectively, these strategies mark a shift away from the hyper-globalised supply chains of the 1990s and 2000s toward arrangements shaped more explicitly by geopolitics.

The rise of “-shoring” accelerated after a series of shocks exposed supply chain fragility. The 2008 financial crisis exposed how heavily production and financing were concentrated in a limited number of locations and firms, the Covid-19 pandemic disrupted logistics and revealed dependence on single suppliers, and Russia’s invasion of Ukraine highlighted the strategic risk of economic interdependence with adversaries.

Trade disputes, sanctions, industrial policy, and concerns over national resilience have subsequently continued to push governments and firms to more seriously reconsider where and with whom they produce.

Reshoring involves bringing production back to a firm’s home country. It is often associated with automation, state subsidies, and strategic industries such as semiconductors, defence, and pharmaceuticals. Despite being an effective way to reduce exposure to cross-border disruption, its implementation tends to be selective rather than comprehensive due to limiting factors such as labour costs, the availability of skilled workers, and capital intensity.

Semiconductors in the United States

Since 2022, the United States has pursued large-scale reshoring of semiconductor manufacturing through federal subsidies and export controls. Companies including Intel and TSMC announced new fabrication plants in Arizona and Ohio, driven by concerns over supply chain vulnerability and reliance on East Asian production.

The shift followed pandemic-era shortages and rising tension over Taiwan. While production costs are higher than in Asia, the policy prioritised domestic capacity for advanced chips linked to defence, artificial intelligence, and critical infrastructure. Progress has been slower than anticipated due to labour shortages and construction delays, but the reshoring effort reflects a strategic decision to accept higher costs in exchange for greater control over supply.

Nearshoring shifts production closer to end markets rather than back to the home country. Firms prioritise geographic proximity to reduce transport risk, improve responsiveness, and limit exposure to distant political shocks. Examples include manufacturing moving from East Asia to Mexico for the US market or from China to Eastern Europe for the EU. Nearshoring reshapes regional trade patterns without dismantling globalisation entirely.

Manufacturing Shift from China to Mexico

In the past five years, Mexico has emerged as a primary nearshoring destination for companies serving the US market. Electronics, automotive, and appliance manufacturers have expanded operations along Mexico’s northern industrial corridor to reduce shipping times, avoid tariffs linked to US–China trade tensions, and improve supply chain responsiveness.

The trend accelerated after Covid-19 disruptions exposed the risks of long-distance logistics. USMCA trade rules provided regulatory certainty, while proximity enabled faster delivery and easier coordination. The result has been record foreign investment inflows into Mexican manufacturing, alongside infrastructure strain and rising competition for skilled labour.

Friendshoring directs supply chains toward politically aligned or strategically-trusted partners. The emphasis is on alignment rather than proximity. Governments actively encourage sourcing from allies in sectors such as critical minerals, energy, and advanced manufacturing. Friendshoring embeds security considerations directly into trade and investment decisions, blurring the line between economic policy and alliance management.

Critical Minerals Between the US and Australia

Friendshoring has been most visible in critical minerals supply chains. Since 2021, the United States has prioritised sourcing lithium, rare earths, and other inputs from politically aligned partners rather than low-cost producers.

Australia has become a key beneficiary, with expanded investment in lithium mining and processing aimed at serving US and allied markets. Agreements tied access to US tax credits and financing to sourcing from trusted partners. The strategy reduced dependence on Chinese refining capacity while embedding resource supply within alliance networks, linking industrial policy directly to geopolitical alignment.

Rather than full relocation, many firms pursue diversification models such as China+1, maintaining operations in China while adding alternative production bases elsewhere. This approach reflects the difficulty of exiting deeply embedded supply chains while acknowledging rising political and regulatory risk. It is a derisking strategy that spreads exposure rather than eliminating it.

Electronics Manufacturing in Vietnam

Rather than exiting China entirely, many electronics firms have adopted a China+1 strategy. Since 2019, companies producing smartphones, consumer electronics, and components have expanded manufacturing capacity in Vietnam while retaining large operations in China. The approach spread risk amid trade tariffs, regulatory uncertainty, and political tension, without dismantling established supplier ecosystems.

Vietnam offered competitive labour costs, improving infrastructure, and access to multiple trade agreements. Production remained integrated across borders, with components often still sourced from China. The result has been diversification rather than decoupling, with firms balancing resilience against the cost and logistical complexity of total relocation.

“-Shoring” strategies often increase resilience but at higher cost. Redundancy, shorter supply chains, and political alignment can reduce efficiency and raise prices. For host countries, these shifts create opportunities for investment and employment, but also expose them to geopolitical spillover, policy conditionality, and sudden reversals if strategic priorities change.

European Battery Manufacturing

Since 2020, EU member states have backed domestic gigafactories through subsidies and regulatory support to reduce reliance on Asian suppliers. While capacity has expanded, projects have faced higher energy costs, labour shortages, and slower scale-up than in established Asian hubs.

Several planned facilities were delayed or downsized as market conditions shifted and demand softened. Manufacturers faced higher unit costs, while governments absorbed financial risk through state aid. The effort improved supply security but reduced cost competitiveness, particularly during periods of volatile demand.

The spread of “-shoring” marks a structural change in the global economy. Supply chains are no longer organised solely around comparative advantage, but around risk management, political alignment, and state priorities. This has reinforced regional blocs, increased the role of industrial policy, and turned trade and investment flows into instruments of strategic competition rather than neutral market outcomes.

Energy Supply After Russia–Ukraine

Following Russia’s invasion of Ukraine in 2022, European states rapidly restructured gas supply chains away from Russian pipelines toward LNG imports from the United States, Qatar, and others. The shift prioritised reliability and political alignment over price. Infrastructure was built at speed, long-term contracts were signed, and energy policy became closely tied to foreign and security policy.

While supply risks were reduced, energy costs increased and exposure to global LNG markets grew. The episode embedded security considerations into trade decisions, accelerating the use of supply chains as instruments of strategic resilience rather than purely economic efficiency.