First offshoring, then reshoring, and now the Biden administration introduces “friendshoring”. It's about trading more with trusted allies instead of countries like China, potentially impacting the global economy and supply chains in several ways:
Shift in supply chains: Companies may face higher operational costs, longer lead times, and challenges in establishing new supplier relationships as they reconfigure their supply chains to align with friendly countries.
Creation of trade blocs: Friendshoring could lead to a divided global economy with separate trading blocs, potentially increasing friction between countries and resulting in a less integrated global market. The World Trade Organization estimates that such a division could lead to a global GDP hit of up to 5%.
Changes in manufacturing hubs: Industries may struggle to uncouple from Chinese manufacturing bases, especially considering that China makes 70% of all smartphones, including 98% of iPhones, and originates nearly half of all global shipments (Bloomberg Intelligence).
Access to non-aligned nations: While the friendshoring policy doesn't necessarily preclude deeper market access for non-aligned nations, companies might prioritize partnerships with countries that have critical inputs for their supply chains, affecting trade with non-aligned countries.
Incentives and tariffs: Companies may face incentives like tax breaks and subsidies to relocate their manufacturing bases to friendly countries, while tariffs could be imposed on goods manufactured in non-aligned nations.
Some companies might adopt the friendshoring strategy now, but its long-term viability remains in question as businesses grapple with inflation and other global economic factors.
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