Manufacturing output in the United States grew by just 1% in 2024, as the country faces "fundamental questions" about the sustainability of domestic reshoring in the months and years to come.

According to an April 30 report from global consulting firm Kearney, imports from 14 so-called "low-cost countries and regions" (LCCRs) in Asia increased by 10% last year, driven in large part by computers, electronics and chemicals, and demonstrating how the U.S. remains reliant on foreign manufacturing for key components. This is also despite a 15% rise in CEOs planning reshoring operations within the next three years, and a 50% increase in CEOs citing geopolitical tensions as a prime motivator for those efforts.

"While CEOs are more committed than ever to reshoring, the U.S. domestic manufacturing ecosystem is still playing catch-up," Kearney partner Patrick Van den Bossche said, noting how just 5% of manufacturers were able to source raw materials locally in 2024. "The next phase will require not just capital, but coordination."

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Efforts to nearshore manufacturing out of Asia and into Mexico also slowed in 2024, as consistent access to roads, energy and water remained a "persistent challenge," and labor costs continued to gradually rise, having increased by 14% since 2020. And as Kearney's report points out, while Mexico remains a cost-effective alternative for manufacturing compared to mainland China, the gap between Mexico and other LCCRs in Asia has narrowed, especially when it comes to the availability of specialized labor. That's led to sourcing from LCCRs "quietly regaining momentum" in sectors where readiness has outweighed proximity.

Moving forward, Kearney said that the next phase of reshoring in the U.S. "will be defined by hard choices" over what U.S. manufacturers can viably produce, where investments should be made, and how to plan for the future marred by a chaotic global market and constant uncertainty regarding new tariffs.

"We know the door to the next industrial era is open," Kearney explained. "What we don't know is who will be ready to walk through it, and what they will choose to build on the other side."