On her trip to South Korea this summer, US Treasury Secretary Janet Yellen touted “friend-shoring,” the practice of moving critical parts of the supply chain from the United States’ rivals and adversaries to countries that are partners and allies. Russia’s continued attempts to blackmail Europe by cutting off natural gas supplies are a powerful reminder of how dangerous it is to rely on unfriendly nations for the supply of critical goods and services. Though the United States no longer depends on other countries for energy, there are other sectors—particularly technology—in which China still plays an unduly dominant role in the US supply chain.
Initiatives are underway to reshore some of this manufacturing back to the United States by revitalizing the country’s industrial base. The latest example is the Chips and Science Act, which the US Congress recently passed to boost domestic semiconductor research, development, and manufacturing. There has also been significant focus on “near-shoring,” which involves moving supply chain to neighboring countries like Mexico or parts of Central and South America. These markets have competitive labor costs, reduce lead times due to their proximity, and give the United States greater security over supply.