For decades globalization has dominated the conversation around the production of goods. As a rule, the largest corporations in the world outsource production to China, India, and many other countries with cheap labor.
But a bipartisan political backlash to the mass exporting of American jobs, and the impacts of the coronavirus pandemic on global supply chains means that the traditional narrative is changing quickly - and that's going to have a big impact on how the United States economy functions moving forward.
Top economist Mohamed El-Erian says inflation can't get to the 2% goal because of supply-chain issues and a "change in globalization."
"You cannot rewire supply chains overnight," he told CNBC. Public outcry in China sparked by the government's strict "zero-COVID lockdowns," has highlighted the need to fix supply chains.
We are only seeing now - after more than two years of global disruption brought on by COVID-19 - major changes in production.
That's where "reshoring" comes in - the buildout of domestic manufacturing capacity and the creation of manufacturing and adjacent jobs. U.S. companies are acknowledging that reshoring, once the subject of talk but no action, is accelerating. According to a recent Deloitte report, more than 60% of manufacturers surveyed have started reshoring or near-shoring their production capacities.
The current semiconductor shortage has also highlighted the issue; the consumer electronics and automotive industries face tough supply constraints over a lack of products.
Because of the August 2022 passage of the CHIPS and Science Act, companies like Intel Corp. (NASDAQ: INTC) are building fabrication facilities ("fabs") in the U.S. to manufacture semiconductors. Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM), one of the most advanced semiconductor manufacturers in the world, is also building right here in the United States.
Volkswagen AG (OTC ADR: VWAPY), one of the world's largest automotive makers and most recognizable brands, is planning to reintroduce its "Scout" nameplate as an electric vehicle (EV). Volkswagen plans for the Scout to be designed, engineered, and manufactured in the U.S. for American customers.
But, I'm not recommending a carmaker - or a chipmaker for that matter. The way I see it, as manufacturing increases, the need to transport these goods becomes even more pressing.