COVID-19 has accelerated deglobalization in manufacturing, but that shift was already underway before the pandemic. Between 1990 and 2016, global trade had been growing at average annual rate of 4.9 percent, according to the World Trade Organization. It’s been waning ever since. Global trade grew just 3 percent in 2018, and it actually declined 0.1 percent in 2019.
New automation technologies that offset higher wages are driving deglobalization by increasing efficiency. As labor becomes a smaller share of the total cost of manufacturing, companies that once offshored due to cheap labor are beginning to favor production in closer proximity to the markets they serve. In other words, they are reshoring. Reshoring is also empowering risk mitigation, resiliency, agility, responsiveness and faster time to market.