Industry Insights: The Rise of Nearshoring

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Industry Insights: The Rise of Nearshoring

Nearshoring, the practice of transferring business operations to nearby countries, has seen a notable increase in the United States recently, particularly regarding Mexico. Many American companies have expanded operation in Mexico and that has fueled more growth near the border. According to the U.S. Census Bureau, Mexico is our top importer and accounts for 14.8% of imports. And the U.S. exports to Mexico account for 15.7% of overall U.S. exports.1

 

Factors like these have increased focus on near-shore opportunities:

  • Trade tensions: The U.S. – China trade war and tariffs have made it more expensive and less appealing to source goods from China.
  • COVID disruptions: The pandemic exposed a lot of weak points in global supply chains making our domestic and near-shore options more appealing.
  • Government incentives: The U.S. and Mexican governments have been working to implement policies and incentives to promote near-shoring.

The government is particularly focused on near-shoring benefits and how it can help advance the U.S. supply chain resilience. The United States Trade Representative (USTR) is holding a hearing on ways to “proactively strengthen domestic manufacturing and to secure trusted supply chains with trusted partners (friend-shorting) and with regional partners (near-shoring).”2

>Nearshoring is reshaping the U.S. supply chain landscape, offering both challenges and opportunities for businesses. While it can provide cost savings, supply chain resilience, and reduced lead times, companies need to carefully consider factors like infrastructure and regulations when deciding to nearshore operations.

 

Quick Facts:

Fuel Prices:

The average U.S. regular gasoline retail prices averaged $3.584 per gallon on 5/22/24 which is up only .050 from the average a year ago. And the retail diesel prices were $3.789 per gallon on average and $.094 less than it was one year ago.3

Tonnage:

The latest date released by the American Trucking Association shows that for-hire truck tonnage declined 2% in Marchafter increasing 4% in February. ATA Chief Economist Bob Costello said, “truck volumes remain lackluster, and it is clear the truck freight recession continued through the first quarter.”4

Economy:

The Consumer Price Index (CPI) rose 3.4% over the last 12 months according to the U.S. Bureau of labor Statistics.5 The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The U.S. import price index has been steadily increasing over the last year as well. The price index went up .9% in April which was the largest 1-month increase since March of 2022.6

 

 

 

 

[1] https://ustr.gov/countries-regions/americas/mexico

[2] https://www.federalregister.gov/documents/2024/03/07/2024-04869/request-for-comments-on-promoting-supply-chain-resilience

[3] https://www.eia.gov/petroleum/weekly/index.php

[4] https://www.trucking.org/news-insights/ata-truck-tonnage-index-decreased-2-march

[5] https://www.bls.gov/news.release/cpi.nr0.htm

[6] https://www.bls.gov/news.release/ximpim.nr0.htm