Introduction
Nearshoring vs. Rightshoring are two key strategies shaping modern manufacturing. As global supply chains evolve with rising tariffs, shifting trade policies, and changing labor costs, businesses must carefully choose where they manufacture to remain competitive.
While both offer advantages, the right choice depends on factors like cost, supplier access, and regulatory compliance. One often-overlooked factor in these decisions is the Country of Origin (COO), which can significantly impact tariffs, trade agreements, and supply chain resilience.
What is Nearshoring in Manufacturing?
Nearshoring refers to relocating production closer to the target market, often to reduce lead times and avoid high import duties. For U.S. companies, this typically means shifting manufacturing from Asia to Mexico, Latin America, or Canada.
Advantages of Nearshoring
- Shorter lead times due to reduced shipping distances
- Lower tariffs under trade agreements like the USMCA
- Easier communication with production teams in similar time zones
Challenges of Nearshoring
- Higher labor and production costs compared to Asia
- Limited supplier networks for specialized components like microcontrollers, PCBs, and sensors
- Dependency on imported components, meaning manufacturers may still need to source from China or Taiwan
What is Rightshoring?
Rightshoring focuses on placing production in the most strategic location rather than defaulting to a single region. It balances cost, supply chain efficiency, and product complexity, ensuring that manufacturing aligns with long-term business goals.
Advantages of Rightshoring
- Access to key suppliers and specialized manufacturing hubs
- Optimized costs by choosing regions that balance labor, logistics, and material expenses
- Greater flexibility to adjust production based on market demand and regulations
Challenges of Rightshoring
- Requires more upfront analysis to identify the best manufacturing locations
- Longer supply chains if not properly optimized
How Country of Origin (COO) Affects Manufacturing Decisions
The decision between nearshoring and rightshoring isn’t just about cost or convenience—Country of Origin (COO) labeling plays a critical role in global trade, especially as policies shift under different administrations.
Recent tariff increases under President Donald Trump have made COO an even more pressing factor in manufacturing decisions. In February 2025, the administration imposed new duties (White House Tariff Update) :
- 10% on imports from China
- 25% on imports from Canada and Mexico
These tariffs directly impact manufacturing strategies, as products from these countries now face higher costs when entering the U.S. Businesses should consider how to deal with US-China tariff increases when planning their sourcing strategy.
COO influences manufacturing in several key ways:
- Tariff exemptions – Agreements like USMCA (United States-Mexico-Canada Agreement) allow nearshored products to qualify for North American COO, potentially reducing duties. However, new tariffs on imports from Mexico and Canada have weakened some of these advantages.
- Compliance with government contracts – Some U.S. procurement policies prioritize domestically manufactured goods, influencing where final assembly takes place.
- Consumer perception – Certain markets emphasize “Made in USA” or “Made in North America” labels, while others focus on cost and supply chain efficiency.
Additionally, the Trump administration’s “America First” trade policies are introducing potential tax breaks and subsidies to encourage companies to manufacture domestically. While this may benefit some industries, many essential components—such as semiconductors, PCBs, and specialized electronics—are still primarily produced in Asia.
With global trade policies constantly evolving, COO now plays a bigger role in determining the true cost of manufacturing. A well-planned rightshoring strategy can help businesses navigate these changes, balancing cost, compliance, and supply chain stability.
Nearshoring vs. Rightshoring: Best Manufacturing Strategy in 2025
Key Differences Between Nearshoring and Rightshoring for Manufacturers
| Factor | Nearshoring | Rightshoring |
|---|---|---|
| Lead Times | Faster due to closer proximity | Optimized based on supplier networks |
| Tariff Benefits | Qualifies for some trade agreements | Can be optimized for different regions |
| Component Access | Limited in nearshore regions | Stronger supplier ecosystem |
| Cost Efficiency | Higher local labor costs | Balances cost, quality, and logistics |
| Risk Mitigation | Reduces reliance on long-haul shipping | Diversifies production locations |
For high-volume consumer goods, nearshoring may provide advantages. But for electronics, industrial equipment, and custom hardware, rightshoring offers a more flexible and scalable solution.
Conclusion
Both nearshoring and rightshoring offer benefits, but they address different challenges. While nearshoring can reduce tariffs and shipping times, rightshoring provides more flexibility, better supplier access, and long-term cost advantages.
COO considerations further complicate these decisions, as tariff exemptions, trade agreements, and compliance requirements must be factored into any manufacturing strategy. Businesses need to assess not just production costs, but also how COO impacts global trade opportunities.
Companies that take a strategic approach to sourcing and production locations will be best positioned to optimize costs, mitigate supply chain risks, and maintain competitive pricing in global markets. Businesses must evaluate the benefits of Nearshoring vs. Rightshoring to ensure long-term supply chain resilience and cost efficiency.
Frequently Asked Questions (FAQs)
What is the main difference between nearshoring and rightshoring?
Nearshoring focuses on moving production closer to the target market, while rightshoring is about choosing the best location globally based on cost, supplier access, and efficiency.
How do tariffs affect nearshoring vs. rightshoring decisions?
Higher tariffs, such as those imposed under the Trump administration, can reduce the cost benefits of nearshoring. Rightshoring helps balance tariff impact by optimizing sourcing locations.
Is nearshoring more cost-effective than offshoring?
Not always. While nearshoring reduces shipping costs, labor and production expenses are often higher than in offshore locations like China. Rightshoring can help strike the right balance between cost and efficiency.
