A closer look at the ‘nearshoring’ trend
| Nearshoring is rising as firms prioritise bringing supply chains closer to home | Trump Tariffs’ have only underlined the need for companies to explore their options | As the global economy evolves, identifying long-term trends is important |
The pandemic, raised geopolitical tensions and supply chain shocks, have all forced companies to rethink how they operate. Many, although not all, are moving away from globalisation strategies and focusing on greater resilience instead, with ‘nearshoring’ – bringing supply chains closer to home – becoming the priority.
A transition from ‘just-in-time’ to ‘just-in-case’ logistics
Nearshoring reflects a move away from ‘just-in-time’ efficiency towards ‘just-in-case’ preparedness. The need for supply chain stability and faster turnaround times is encouraging businesses to bring their operations closer to the markets they serve. ‘Trump Tariffs’ have only underlined the need for companies to explore their options. This is opening up new opportunities in both developed and emerging markets.
For example, countries like Mexico, Poland and Vietnam are positioning themselves as regional production hubs. Demand is also increasing across sectors such as automation, logistics, real estate, infrastructure and advanced manufacturing, as companies modernise supply chains closer to home.
A temporary trend or lasting change?
While some view nearshoring as a short-term response to recent disruptions, others see globalisation weakening. Perhaps, but labour costs in nearshoring destinations are often higher than in traditional offshore markets, while infrastructure and policy support can vary widely. Also, restructuring supply chains is complex, expensive and time consuming. Political risk and protectionist policies all add to the challenges.
What do the professionals think?
According to investment manager PGIM, despite rising tariffs and shifting trade, around 75% of the world’s economy remains focused on global integration rather than nearshoring. Shehriyar Antia, Head of Thematic Research at PGIM, explains, “Even if America’s ‘small yard’ of protected industries grows larger, companies in most industries will still seek out the benefits of free trade and competitive advantage.”
An evolving investment theme
While nearshoring will create new investment opportunities, choosing the right ones takes careful research. As the global economy evolves, those who identify and understand long-term trends are likely to be rewarded. You can rely on us to do just that.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.