The widespread adoption of e-commerce across America has led to businesses prioritizing a stronger supply chain. In 2024, total e-commerce sales in the U.S. hit 1,192.6 billion, a healthy increase of 8.1 percent from 2023. While the growth of e-commerce isn’t new, customer expectations have become much more demanding. Product availability, pricing, and shipping continue to be trust signals that encourage shoppers to move their carts to checkout.
Shoppers today have multiple choices of sellers across leading platforms ready to offer a great deal. In response, sellers have moved away from traditional sourcing and procurement strategies to betting on the United States’ political and economic allies. One such practice that’s gaining prominence in the supply chain landscape is Friendshoring. This guide will walk you through friendshoring and how it can help you remove the dependency on China to source your products.
What is Friendshoring?
Friendshoring is when you prioritize countries with strong political and economic ties to the United States to source from. It helps you build a resilient supply chain by moving away from countries with volatile trade relationships to ones with shared values and interests.
By switching to Friendshoring, you protect your products from the impact of unforeseen tariff hikes. Friendshoring can also help you mitigate the immediate effect of trade disputes and geopolitical instability without disrupting inventory flow into the U.S. and selling it to your customers.
How is Friendshoring different from Nearshoring?
Nearshoring focuses on geographical proximity of inventory to ensure product availability while reducing logistical vulnerabilities. Sellers importing inventory from China would typically bring the consignment to a warehouse in Mexico and then ship it into the U.S.
Friendshoring lets sellers source products from countries that foster better political and economic alignment with the United States. This helps sellers mitigate risks from sudden trade disputes and geopolitical instability that would impact their ability to import into the U.S. and sell. For example, friendshoring would mean sellers importing into the U.S., choosing an alternate country with lower import tariffs like the Philippines.
Nearshoring was a traditional approach sellers took to increase speed, lower logistics costs, and improve regional responsiveness. Friendshoring helps sellers focus on long-term gains by prioritizing political and economic factors for supply chain security.
Benefits of Friendshoring
For e-commerce sellers, friendshoring offers a strategic advantage in securing inventory and sustaining business operations amid evolving trade policies about U.S. imports. But how does friendshoring matter in the larger scheme of things, let’s find out:
Reducing Risks Arising from Adversarial Relationships
With friendshoring, sellers minimize the exposure to fluctuating tariffs and trade restrictions due to adversarial relationships between nations on their supply chain. Thanks to greater cost predictability, friendshoring helps you improve the accuracy of your pricing strategy.
Cost-Effective Sourcing for Sellers Importing into the U.S.
While friendshoring may not be as economical as nearshoring, it will help you stabilize costs by offsetting high import duties. By avoiding unpredictable regulatory fees and penalties on import goods from high-risk regions, you can continue selling to customers at competitive pricing.
Improved Compliance and Faster Clearance of Imports
When you source from countries with good trading relationships, the importing process is generally governed by transparent requirements. The import process will be quicker, and your consignment will face lesser scrutiny at customs. You will also reduce the possibilities of delays due to shipments stuck in port.
Better Brand Reputation among American Shoppers
American shoppers are proactive in ethical sourcing and responsible business practices. During ongoing trade wars, shoppers factor in the country of origin while choosing a product to buy. Although price of the product beats takes the top spot, the country of origin will remain influential. Friendshoring and importing goods sourced from nations sharing cordial trade values helps you improve your brand’s reputation. This helps you cater to demand better and allows your products to win the minds of your socially conscious customers.
Uncoupling from China with Strategic Friendshoring Initiatives
China has long been a manufacturing powerhouse and a preferred source for e-commerce sellers importing goods into the U.S. due to its vast production capabilities and competitive pricing. China continues to dominate as a global exporter of apparel, consumer electronics, and autoparts. In 2023, China held a strong share of global exports, translating to 30% of the world’s apparel, 54% of consumer electronics, 14% of manufacturing products, and autoparts.
However, recent tariff changes and geopolitical tensions have prompted sellers importing stock into the U.S. to diversify their supply chains through friendshoring.
Challenges with Current Supply Chain Practices Involving Nearshoring in Mexico
Sellers following nearshoring in Mexico will now face the burden of additional tariffs through the recent trade policy changes.
Tariff Impacts: Recent tariff changes imposed by the U.S. on Chinese imports will increase costs for e-commerce sellers, affecting profit margins. Choosing the old route will impact the competitiveness of your brand in a market that evaluates purchase decisions on the basis of the price tag.
Geopolitical Risks: Ongoing geopolitical tensions between the U.S. and China may further escalate into trade embargos and trade wars impacting the flow of goods from China to the United States. Such risks will affect your supply chain stability, leading to slower inventory replenishment times, causing prolonged stock outs.
Potential Friendshoring Markets for Sellers to Source Products
With higher tariffs on Chinese origin goods, it’s natural for e-commerce sellers to seek alternative manufacturing hubs as a part of friendshoring. Based on trade relationship and manufacturing power, let’s look at popular countries that share cordial trading agreements with the United States.
Vietnam
What it exports: Apparel, consumer electronics, home and living products, footwear, toys and games.
Trade Relationship with the U.S.: Vietnam is part of the U.S.-ASEAN trade relations, with growing bilateral trade. The U.S. is one of Vietnam’s largest trading partners. Vietnam has a relatively friendly trade environment with the U.S., with ongoing discussions for deeper economic cooperation.
Global Share of Exports: Vietnam accounts for about 1.4% of global exports, with a significant portion going to the U.S. and other ASEAN countries.
Indonesia
What it exports: Fashion, beauty, electronics, furniture, and health products.
Trade Relationship with the U.S.: Indonesia is a key member of ASEAN, with significant trade ties to the U.S. However, recent regulations have restricted cross-border e-commerce, requiring specialized licenses for foreign sellers.
Global Share of Exports: Indonesia accounts for about 1.1% of global exports, with a growing focus on regional trade within ASEAN.
Thailand
What it exports: Consumer electronics, fashion, rubber products, home decor, and toys.
Trade Relationship with the U.S.: Thailand is a major U.S. trading partner in ASEAN, with a strong focus on bilateral trade agreements. Thailand has a relatively open trade environment with the U.S.
Global Share of Exports: Thailand accounts for about 1.3% of global exports, with significant trade ties to the U.S. and other ASEAN countries.
Malaysia
What it exports: Electronics, machinery, canned goods, oils and preservatives, sanitary products, cleaning supplies, and raw materials.
Trade Relationship with the U.S.: Malaysia is a significant trading partner of the U.S. within ASEAN, with ongoing discussions for deeper economic cooperation. Malaysia has a relatively friendly trade environment with the U.S.
Global Share of Exports: Malaysia accounts for about 1.2% of global exports, with a strong focus on electronics and machinery exports to the U.S. and other countries.
Singapore
What it exports: High-tech electronics, machinery, glassware, furniture, photo and medical apparatus and luxury goods.
Trade Relationship with the U.S.: Singapore has a strong free trade agreement with the U.S., facilitating smooth trade flows. Singapore is a strategic trade hub with a highly developed logistics infrastructure.
Global Share of Exports: Singapore accounts for about 2.5% of global exports, serving as a key trade hub for Southeast Asia.
India
What it exports: Textiles, electronics, and jewellery, autoparts, canned goods, home decor, and pharmaceuticals.
Trade Relationship with the U.S.: The U.S. and India have been strengthening their trade ties, with ongoing discussions for a potential free trade agreement. India’s trade environment with the U.S. is generally positive but complex due to regulatory requirements.
Global Share of Exports: India accounts for about 2.1% of global exports, with a growing focus on electronics and textiles exports to the U.S. and other countries.
Shifting from nearshoring to friendshoring mandates supplier diversification, and navigating evolving trade policies. The time to transition depends on evaluating costs, logistics feasibility, and potential tariff advantages while simultaneously hoping for minimal disruption to your business’s supply chain and sales.
How Locad can help e-commerce businesses in implementing Friendshoring
The right fulfillment partner can help you transform your business operations with limited risk. Confidently streamline how you source inventory, optimize freight, and maintain steady stock levels with Locad.
Leverage the Known Network of Countries to Source From
With a global presence across Southeast Asia, find alternative suppliers to procure inventory. Locad’s warehousing presence and local carrier network helps you move inventory from Southeast Asia and ship it to the United States at affordable costs.
Regulatory Compliance Expert for Seamless U.S. Importing
With an expert team to guide you, rest assured that your shipment complies with U.S. import laws for a hassle-free customs clearance and import process. Avoid paying unnecessary penalties or risking shipment delays while moving inventory from the supplier to the United States.
Integrated Fulfillment Partner with U.S. Warehouse Network
Whether you are procuring inventory for B2B selling or direct to customers, use Locad’s Logistics Engine, the tech that drives powerful fulfillment innovation. Store your inventory in scalable warehouse spaces in the United States. Deliver to retail outlets and customers faster with our partnership with regional last mile carriers.
Optimize Inventory Costs and Maximize Margins
Transitioning from previous nearshoring practices with the Section 321 de minimis loophole would have lowered your operational costs. With Friendshoring, you may have additional tariffs involved. However, with Locad’s localized fulfillment in the U.S., inventory storage costs can be optimized with scalable storage. Split your inventory across warehouses, reduce shipping costs, and speed up fulfillment time. Your customers can access your products at competitive prices and you stand to reap healthy margins by offsetting costly overheads that come with fixed warehousing practices.
Growth Engine for E-commerce Sellers in the U.S.
Uncertainty in import policies can disrupt your business operations, leaving you very little time to adapt. With Locad, you unlock a superior partnership that keeps a pulse on evolving trade regulations and finding the best way for you to do your business. Partner with a flexible storage and fulfillment infrastructure to amplify sales and sell to American shoppers. As a tech-powered inventory storage and e-commerce fulfillment partner in the United States, we understand what it takes to be the growth engine of your business, with features to accommodate scale, manage omni-channel selling and help you win customers for life.
Winning in a premium e-commerce market like the United States is challenging. However, e-commerce sellers looking to improve operational control, fight fluctuating production costs, and shield their business from inventory shortages during evolving trading policies can gain the upper hand and remain competitive. With Locad, you can adapt to new changes, comply with new mandates, and keep your supply chain operations running to meet the demand of American shoppers.
