Trade war depresses Asian imports, Kearney US Reshoring Index finds

14 April 2020 Consulting.us

US firms in 2019 sourced much fewer manufactured goods from 14 Asian countries as a result of US trade policies, according to the seventh annual US Reshoring Index from consulting firm Kearney. US domestic manufacturing remained relatively unchanged.

Imports of manufactured goods from the group of 14 Asian low-cost countries (LCCs) – including China, Taiwan, Malaysia, India, Thailand, and Vietnam – declined by 7.2% to $757 billion in 2019 from $816 billion in 2018. The decline was driven by a 17% drop in imports from China, long the preferred choice for offshore production, as tariffs from the US administration made their impact felt.

US domestic manufacturing output was $6.27 billion in 2019, virtually unchanged from 2018.

The US market imported 12.1 cents worth of offshore production from Asian LCCs for every $1 of domestic production, which was nearly 1% less than 2018. The Reshoring Index uses basis points (1% change = 100 basis points), with a positive number indicating net reshoring. The index score of 98 bps in 2019 is the highest recorded, with the previous high in 2011 at 11 bps. The index low was -112 bps in 2015.

Year-over-year change in the US manufacturing import ratio (MIR)

China’s decline drove an uptick in other Asian LCCs, with US manufacturing imports from those countries increasing by $31 billion last year. Meanwhile, manufacturing imports from Mexico rose by $13 billion.

“Much of China's loss was Vietnam's gain," said Patrick Van den Bossche, Kearney partner and co-author of the study. "Of the $31 billion in US imports that shifted from China to other Asian LCCs, almost half (46 percent) was absorbed by Vietnam, which exported $14 billion more manufactured goods to the US in 2019 than it did in 2018."

The gains by Mexico and Vietnam were mainly in product categories impacted by tariffs, as companies shifted some of their supply from China to alternative countries.

Now, the Covid-19 pandemic has companies rethinking their sourcing strategies even more – and attempting to build more resilience to unpredictable disruptions into their supply chains.

"Three decades ago, US producers began manufacturing and sourcing in China for one reason: costs,” said Van den Bossche. “The US-China trade war brought a second dimension more fully into the equation – risk – as tariffs and the threat of disrupted China imports prompted companies to weigh surety of supply more fully alongside costs. Covid-19 brings a third dimension more fully into the mix­, and arguably to the fore: resilience – the ability to foresee and adapt to unforeseen systemic shocks."


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