What is the Reshoring Effect?

August 12, 2020

source: Fairfield County Economic Development

COVID-19 has brought new challenges to manufacturers across the country. It has devasted some and increased business for others. In this week’s blog, we explain what the “reshoring effect” is and how it may impact Fairfield County.

To begin, “reshoring” also known as “on-shoring” is the practice of transferring a business operation that was moved overseas back to the country from which it was originally located. International trade deals helped to drastically cut labor and retail costs but a majority of companies are realizing the risks this has on their supply chain. Industries relying on offshore production have to rethink their structuring. By “reshoring” suppliers, no longer have to think about international trade deals and long-distance shipping costs.

Candace Browning, Head of Bank of America Global Research stated that “Higher wages in the developing world and advances in automation are reducing some of the cost benefits that have long made overseas suppliers so attractive.[1]” On top of this, U.S. municipalities look to attract business by offering incentives. These incentives can be in the form of tax abatements, reduced land costs, and state/county grants, or a mixture of all the above. Some of you may ask, “How does the county recoup the benefits of giving these ‘breaks’ to large industries?” Here’s an example.

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