Executive summary

Kearney’s annual Reshoring Index tracks whether manufacturing is coming back to America from Asia, where so many jobs have been offshored over the past several decades (see sidebar: Reshoring Index explained). Our latest findings show that the US has not reclaimed manufacturing jobs in any material way.

Reshoring Index explained

To gauge the US Reshoring Index, we look at (1) the import of manufactured goods from 14 traditional offshore trading partners: China, Taiwan, Malaysia, India, Vietnam, Thailand, Indonesia, Singapore, Philippines, Bangladesh, Pakistan, Hong Kong, Sri Lanka, and Cambodia; and (2) US domestic gross output of manufactured goods.

We then calculate the manufacturing import ratio (MIR), which is simply the result of dividing the first number by the second. The US Reshoring Index is the year-over-year change in the MIR, expressed in basis points (1 percent change = 100 basis points).

A positive number indicates net reshoring—the degree by which gross domestic output exceeded imports from the 14 LCCs as compared to the preceding year. A negative number indicates an increase in offshoring. Here is the precise 2020 Reshoring Index calculation: 2019 MIR 12.08 percent - 2020 MIR 12.95 percent = -0.87 x 100 = -87

Data sources
¹ Bureau of Labor Statistics
² Bureau of Economic Analysis
³ Federal Reserve of St. Louis
⁴ US International Trade Commission

The disruptions wrought by COVID-19 make the latest Kearney Reshoring Index uniquely challenging to interpret. Our annual reshoring metric plunged from an historic high in 2019 (due mainly to a sharp decline in imports from China, not a surge in domestic manufacturing) deep into negative territory for 2020. Yet the Index took many twists and turns throughout the year, sinking deepest during the 2nd quarter, when the pandemic shuttered much of US manufacturing capability; rebounding solidly back up into positive territory over the summer, when US production resumed; then ending the year in decidedly negative territory.

US manufacturing imports from China took a similar roller-coaster ride, albeit on a different timetable. COVID struck first in China, and US manufacturing imports from Asia’s largest low-cost country (LCC) dipped in the 1st quarter, then rose even more sharply in the 2nd quarter, when many US facilities were idled by the pandemic. Later in the year, US manufacturing imports from other LCC countries (led by Vietnam, Taiwan, and Thailand) surged, while US manufacturing imports from China flattened to end 2020 at roughly the same volume as in 2019. US manufacturing imports from Mexico, the primary “nearshoring” LCC option, dropped for the year, largely due to disruptions the US automotive sector experienced during 2020.

Despite the recent plunge in the Kearney Reshoring Index, a related Kearney survey of US manufacturing executives found that many intend to reshore at least some manufacturing operations over the next three years. In personal interviews, some executives voiced a strong intent to reduce dependence on manufactured imports from any one country, particularly China. A sister survey of US manufacturing plant managers found that COVID significantly disrupted the labor productivity gains many facilities had achieved in recent years. A majority of plant managers also reported that it is actually more difficult to find and hire the right workers now than it was before COVID forced widespread employee furloughs and layoffs.

This array of shifting variables has made what was once essentially a binary choice—offshore or reshore—a more complex decision set. “Right-shoring” requires a comprehensive and nuanced consideration of where the company should source manufactured products.

Global pandemic roils reshoring picture

In 2020, US imports of manufacturing goods from the 14 Asian low-cost countries (LCCs) tracked in our annual study equaled 12.95 percent of US domestic gross manufacturing output, up from 12.08 percent in 2019 (see figure 1A). This resulted in a negative 2020 Reshoring Index of -87 (see figure 1B).

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