The Reshoring Reality: Why US Manufacturing Faces Deeper Hurdles

According to Supply Chain Dive, Rosemary Coates, executive director of the Reshoring Institute, reveals that while CEOs increasingly want to bring manufacturing back to the US, significant economic and infrastructure barriers remain. The Institute’s research shows companies are adopting China-plus strategies, with Mexico emerging as a preferred alternative due to dramatically lower wages—$2.59 hourly in Tijuana versus $17.25 in San Diego. Coates emphasizes that US manufacturing faces critical shortages in both skilled labor and factory infrastructure, noting that the electrical grid cannot support new facilities and many locations lack adequate transportation access. The transition toward reshoring requires sophisticated automation and re-engineering rather than simply relocating labor-intensive processes.

The Hidden Infrastructure Crisis

What Coates identifies as an infrastructure problem extends far beyond factory buildings. The US industrial ecosystem has atrophied over decades of offshoring, creating a supply chain vacuum that cannot be quickly filled. When companies moved manufacturing overseas, they didn’t just relocate assembly lines—they moved entire supplier networks, logistics hubs, and specialized service providers. Rebuilding this requires more than capital investment; it demands coordinated regional planning and public-private partnerships that currently don’t exist at the scale needed. The electrical grid limitations Coates mentions are particularly concerning, as modern automated manufacturing requires stable, high-capacity power that many industrial zones cannot provide without significant upgrades.

The Skills Mismatch Reality

The distinction between labor shortage and skill shortage is crucial, but understates the systemic nature of the problem. The US education system has largely abandoned vocational training while over-emphasizing four-year degrees, creating a generation gap in manufacturing expertise. Community college programs can help, but they face funding challenges and cannot quickly scale to meet demand. More fundamentally, the perception of manufacturing careers remains problematic—many Americans still view factory work as low-skill, low-pay labor rather than the highly technical, well-compensated positions that modern automation creates. Changing this perception requires coordinated industry marketing and demonstrated career pathways that currently remain underdeveloped.

The Economic Realities of Automation

Coates correctly identifies that labor-intensive manufacturing won’t return, but the automation alternative presents its own challenges. The capital investment required for robotics, AI systems, and advanced manufacturing execution systems creates high barriers to entry, particularly for small and medium enterprises. These companies often lack the technical expertise to implement and maintain sophisticated automation, creating a two-tier manufacturing landscape where only large corporations can afford reshoring. The China-plus-one strategy many companies are adopting reflects this reality—they’re diversifying risk rather than fully committing to US production.

Beyond Simple Tariff Calculations

The executive hesitation Coates describes regarding tariff uncertainty reflects deeper strategic concerns. Companies aren’t just waiting for trade policy to stabilize—they’re fundamentally reevaluating global supply chain assumptions that have guided decisions for decades. The China dependency that seemed economically rational in the 1990s now carries geopolitical risks that extend beyond cost calculations. However, the Mexico alternative presents its own complexities, including capacity constraints, security concerns, and potential future trade agreement modifications. Companies are essentially trying to build resilient, multi-regional supply chains in an environment where the rules keep changing.

A Realistic Path Forward

The reshoring conversation needs to move beyond binary thinking about bringing jobs back. Successful US manufacturing resurgence will likely focus on high-value, technologically advanced sectors where automation advantages outweigh labor cost differentials. This means specialized manufacturing in areas like aerospace, medical devices, and advanced electronics rather than consumer goods assembly. The infrastructure investments needed—from transportation to energy to digital connectivity—require coordinated federal and state policies that currently lack the necessary funding and political consensus. The timeline for meaningful reshoring is measured in decades, not years, requiring sustained commitment across multiple administrations and business cycles.

The Global Competitive Landscape

While the US debates reshoring, other countries are aggressively positioning themselves in the evolving manufacturing landscape. Mexico’s wage advantage is just one factor in its growing appeal—proximity to US markets, trade agreements, and improving infrastructure make it a logical near-shoring destination. Meanwhile, countries like Vietnam, India, and Eastern European nations continue to develop their manufacturing capabilities, offering alternatives to China that maintain labor cost advantages over the US. American manufacturers aren’t just competing on cost—they’re competing against global ecosystems that have continued evolving while US industrial policy remained inconsistent.