Friendshoring: Is This the End of Globalization as We Know It?

For decades, globalization has been the prevailing force shaping international trade—fueled by free trade agreements, technological advances, and the rise of global supply chains. Businesses sourced goods from wherever was cheapest, regardless of political alignment, geography, or shared values. But as we move through the 2020s, a new paradigm is taking shape: friendshoring.

This emerging strategy marks a shift in trade and investment patterns, where companies and governments prioritize trusted trade partners—typically allies and countries with shared political values—over purely cost-driven decisions. It represents not just a reaction to recent global shocks but a structural rethinking of how and with whom nations trade.

In this blog post, we explore what friendshoring is, why it’s gaining momentum, how it’s affecting global trade flows, and what it could mean for the future of globalization.

What Is Friendshoring?

Friendshoring, also known as allyshoring, refers to the practice of relocating supply chains and manufacturing to countries that are deemed geopolitical allies or that share similar values, such as democratic governance, rule of law, and economic openness.

Rather than relying on the lowest-cost producers—many of which may be in politically unstable or adversarial countries—friendshoring emphasizes resilience, trust, and security in supply chains.

It is part of a broader trend away from offshoring (moving production to low-cost countries) and a more nuanced alternative to reshoring (bringing production back entirely to the home country).

Key characteristics of friendshoring include:

• Prioritizing trade with countries that have stable political relations.

• Reducing dependence on rivals like China and Russia.

• Creating regional supply chain hubs among trusted partners.

• Mitigating risks of sanctions, export controls, or geopolitical conflict.

Why Is Friendshoring Gaining Popularity?

The shift toward friendshoring is not a coincidence. It’s a response to a series of global disruptions and strategic concerns that have exposed vulnerabilities in the traditional model of globalization.

1. COVID-19 Supply Chain Disruptions

The pandemic revealed just how fragile global supply chains can be. Lockdowns, factory closures, and transportation bottlenecks caused shortages of everything from semiconductors to PPE. Many countries realized they were overly dependent on single suppliers or far-flung regions, often without redundancy.

2. U.S.–China Rivalry and Tech War

The deterioration of U.S.–China relations has been a key driver. Trade tensions escalated during the Trump administration and have continued under President Biden. Tariffs, sanctions, and restrictions on key technologies (like semiconductors and AI) have made it riskier for U.S. and allied companies to rely on Chinese manufacturing.

3. Russia’s Invasion of Ukraine

Russia’s 2022 invasion of Ukraine further intensified concerns about geopolitical dependencies. Europe’s reliance on Russian energy turned into a liability almost overnight. Governments realized that economic ties with autocratic regimes could be weaponized.

4. National Security and Strategic Autonomy

Countries are increasingly treating economic security as national security. Control over critical resources and technologies—such as semiconductors, rare earth minerals, and pharmaceuticals—is now seen as a strategic imperative. Friendshoring enables greater control over these supply chains.

5. Environmental and Social Concerns

Friendshoring also aligns with growing concerns about environmental sustainability, labor standards, and human rights. Western governments and consumers are becoming more sensitive to where and how products are made.

Examples of Friendshoring in Action

1. Semiconductor Manufacturing

The U.S. and its allies are actively working to reduce their dependence on Asian semiconductor manufacturers—particularly in Taiwan, South Korea, and China.

• The CHIPS and Science Act in the U.S. allocates over $50 billion to encourage domestic chip production and partnerships with trusted countries like Japan and the Netherlands.

• The EU Chips Act aims to double Europe’s share of global chip production by 2030.

• India and Vietnam are emerging as alternative hubs for electronics manufacturing.

2. Energy Supply Chains

• Europe’s shift away from Russian gas toward imports from the U.S., Norway, and Qatar is a form of friendshoring in the energy sector.

• Battery and electric vehicle supply chains are being reorganized to rely more on Canadian, Australian, and Chilean suppliers of critical minerals, rather than China.

3. Pharmaceutical Production

During the pandemic, governments realized the risks of relying on China and India for key pharmaceuticals and active pharmaceutical ingredients (APIs). Initiatives are now underway in the U.S., EU, and Japan to localize or friendshore essential drug production.

4. Trade Agreements and Alliances

Recent trade initiatives reflect friendshoring dynamics:

• The Indo-Pacific Economic Framework (IPEF) launched by the U.S. includes 14 countries in Asia and Oceania, excluding China.

• The U.S.–EU Trade and Technology Council seeks to align transatlantic trade standards in key sectors.

• Quad (U.S., Japan, India, Australia) cooperation is deepening on technology and supply chains.

Economic and Political Implications

Friendshoring is not without consequences—both positive and negative. It is already reshaping trade flows, investment decisions, and diplomatic priorities.

1. Shift in Global Trade Routes

As companies diversify away from China, countries like India, Mexico, Vietnam, Poland, and Malaysia are seeing increased foreign investment. These “friendly” countries are benefiting from a rebalancing of trade.

Example: Apple is expanding iPhone production in India, while Tesla is sourcing more components from Mexico.

2. Cost Implications

Moving supply chains from ultra-low-cost countries to more expensive (but politically aligned) ones can raise production costs. This could lead to:

• Higher prices for consumers.

• Reduced profit margins for businesses.

• Inflationary pressures in the short term.

However, advocates argue that the long-term benefits of supply chain security outweigh these costs.

3. Winners and Losers

Winners:

• Friendly middle-income countries with strong infrastructure and stable governments.

• Domestic industries in developed countries receiving subsidies or reshored investment.

• Regional trade hubs (e.g., Mexico in North America, Poland in Europe, Vietnam in Asia).

Losers:

• China and other nations deemed “unfriendly” may lose market share.

• Global suppliers facing rising compliance and regulatory complexity.

• Consumers in the short term, due to higher prices or reduced product variety.

4. Geopolitical Realignment

Friendshoring reinforces blocs of aligned countries, potentially leading to a bipolar or multipolar trade system, where trade flows are increasingly determined by politics, not just economics.

This could deepen divisions between:

• Western democracies and authoritarian regimes.

• U.S.-aligned and China-aligned economies.

• “Open” and “closed” digital and financial systems.

Is Friendshoring the End of Globalization?

Not quite—but it may be the end of unconditional globalization.

The vision of a fully interconnected, borderless global economy is giving way to a more fragmented, values-based model. Global trade isn’t disappearing; it’s being restructured. Countries are still trading across borders, but they are doing so more selectively.

This evolving system has been called:

• “Slowbalization” – a slowdown in global integration.

• “Decoupling” – especially between the U.S. and China.

• “Re-globalization” – a reimagined globalization based on new principles.

Friendshoring may be part of a broader regionalization trend, where trade is concentrated in geographically and politically cohesive regions—like North America, the EU, and parts of Asia.

Business Considerations: Adapting to the New Trade Reality

Businesses navigating this shift need to be proactive, flexible, and strategic. Key considerations include:

1. Supply Chain Mapping

Companies must understand where their inputs come from, assess geopolitical risks, and identify potential bottlenecks. Mapping the full supply chain—not just Tier 1 suppliers—is critical.

2. Diversification

Diversifying suppliers across multiple regions or countries (a “China +1” strategy) can increase resilience. Friendshoring may mean having alternate facilities in Mexico, India, or Eastern Europe.

3. Compliance and Standards

Governments may require companies to meet certain labor, environmental, or security standards for goods to qualify as “friendshored.” Staying ahead of these rules can offer competitive advantages.

4. Leveraging Incentives

Many governments offer subsidies, tax breaks, and grants to companies that relocate or build facilities in friendshoring-friendly locations. Understanding and utilizing these incentives is crucial.

Challenges and Criticisms of Friendshoring

Despite its strategic rationale, friendshoring faces several criticisms:

1. Complexity and Costs

Friendshoring is not a one-size-fits-all solution. Reconfiguring supply chains is expensive and time-consuming, especially for industries with deeply entrenched global networks.

2. Exclusionary Risks

Critics argue that friendshoring could reinforce global inequalities by excluding low-income countries that don’t align politically with major powers. This may hinder development in parts of Africa, Latin America, and Southeast Asia.

3. Environmental Trade-offs

More regional or redundant supply chains could lead to higher carbon footprints if transportation routes are longer or production is less efficient in new locations.

4. Weaponization of Trade

There is concern that friendshoring legitimizes the use of trade as a political weapon, leading to more frequent sanctions, tariffs, and economic coercion.

What’s Next for Friendshoring?

As we look ahead, friendshoring is likely to accelerate, driven by both public and private sector initiatives. Governments are institutionalizing friendshoring through industrial policies, while businesses are embedding it into risk management frameworks.

Future developments may include:

• The creation of “trusted supply chain” certifications or trade zones.

• Expanded use of digital supply chain tracking to verify origin and compliance.

• Growth of regional trade agreements with embedded friendshoring provisions.

• A possible “carbon club” of countries that trade based on shared climate standards.

Conclusion: A New Era of Strategic Global Trade

Friendshoring represents more than just a supply chain trend—it signals a fundamental shift in how nations and companies think about international trade.

The hyper-globalized era, where cost efficiency reigned supreme, is giving way to a more cautious, strategic, and values-driven model. Whether this new era will deliver greater resilience or lead to increased fragmentation remains to be seen.

For businesses, investors, and policymakers, understanding and adapting to friendshoring is not optional—it’s essential. As the global economic order realigns, those who embrace trusted partnerships, transparent supply chains, and regional opportunities will be best positioned to thrive in the decades ahead.