Against this backdrop, the major economies in Europe and the United States are shifting towards a new configuration that prioritizes economic security, diversification of supply, and reduced dependence on a few high-risk nodes. Nearshoring (bringing production closer to the end market) and friendshoring (reallocating production to “trusted partners”) have become two key instruments in the strategy to restructure supply chains. These are not short-term trends; they are shaping a “new logistics order” in which security, flexibility and sustainability are placed on an equal footing with cost efficiency.
From the “Great Reallocation” to economic security
Recent research indicates that the world has not entered a phase of complete “de-globalization” but rather a process of “great reallocation” in supply chains. The composition of U.S. imports shows that in recent years China’s share in total U.S. imports has fallen significantly, while the shares of Viet Nam, Mexico and several other Asian economies have risen visibly. Trade flows have not disappeared; they have been redirected towards suppliers considered safer, more diversified and less exposed to geopolitical risk.
At the policy level, many international organizations warn that “self-sufficiency at any cost” (extreme reshoring) could inflict major losses on global welfare: world trade could contract sharply, while resilience would not necessarily improve to the same extent. As a result, the focus in Europe and the United States is shifting from “decoupling” to “de-risking”: not severing ties, but reducing concentration of risk, diversifying sources of supply and building networks of trusted partners.
On that basis, nearshoring and friendshoring strategies are being implemented not only by firms but are also being anchored in industrial policy packages, green subsidies, trade agreements and toolkits to screen inbound and outbound investment and technology flows.
United States – North America: Mexico as the “manufacturing rear base” for the U.S. market
In the United States, nearshoring is most pronounced in strategic industries such as automotive, electrical and electronic equipment, clean energy and digital infrastructure. Following multiple rounds of high tariffs on Chinese goods and disruptions in trans-Pacific shipping, many corporations have shifted substantial parts of their production processes to North America—especially Mexico—in order to maintain cost advantages while benefiting from preferences under the United States–Mexico–Canada Agreement (USMCA).
Mexico has thereby emerged as an assembly and processing hub for the U.S. market. Major electronics and technology equipment manufacturers have expanded plants in Mexican border states, employing tens of thousands of workers to supply computers, servers and electric-vehicle components to North America. Some technology and semiconductor giants are also considering or implementing new manufacturing projects in both the United States and Mexico to “neutralize” the risks associated with excessive dependence on China.
Policy packages such as the Inflation Reduction Act (IRA) and the CHIPS Act not only incentivize green manufacturing and semiconductor production within U.S. territory, but also create “priority adjacent zones” in which plants in Mexico and Canada are treated as extensions of the North American security supply chain. As a result, freight volumes through ports and land border crossings between the United States and Mexico have risen rapidly, triggering waves of investment into logistics centers, warehousing and transport services in Texas, Arizona and along the southern border corridor.
Europe: “de-risking”, CEE and North Africa as a new production belt
On the European side, the strategy repeatedly emphasized by policymakers is “de-risking, not decoupling” from China: the aim is to reduce dependence in sensitive sectors such as digital technology, batteries, renewable-energy equipment and critical raw materials, while maintaining an open trading regime. To that end, the EU is rolling out a suite of instruments: acts on critical raw materials and green industry, strategic industry support funds, and initiatives to enhance transparency and diversification in supply chains.
In practice, this strategy is clearly reflected in the partial relocation of production from Western Europe to Central and Eastern Europe (CEE) and North Africa. In CEE, countries such as Poland, Hungary, Slovakia, Czechia and Romania are becoming Europe’s “new factory floor” in automotive and electrical/electronic equipment, thanks to a combination of proximity to major consumer markets, competitive labor costs, upgraded infrastructure and a unified legal framework within the EU. Recent investments in electric-vehicle and component plants by major carmakers in Hungary, Slovakia and Poland are emblematic of a “restructured but still intra-European” value chain.
To the south of the Mediterranean, Morocco has emerged as a new nearshoring hub. The country has recorded strong FDI growth, with inflows concentrated in autos, electronics, high-tech agriculture, pharmaceuticals and textiles. Morocco leverages its geographical proximity to the EU, a broad FTA network and modern port infrastructure—especially the Tanger Med port and industrial complex—to attract manufacturing projects targeting the European market. Its priority on developing renewable energy, which accounts for a rising share of the energy mix, further enhances Morocco’s appeal to corporations seeking to combine production shifts with decarbonization goals.
In short, Europe is progressively shaping an “extended production belt” around the core EU market, stretching from CEE to North Africa. This both reduces dependence and increases competitive pressure on production locations outside the region, including Southeast Asia.
Asia in friendshoring strategies: opportunities and pressures for Viet Nam
Even as nearshoring and friendshoring advance in Europe and North America, Asia remains the focal point of global supply chains. Rather than exiting China entirely, many multinationals are pursuing “China+1” strategies, maintaining part of their production capacity in China while adding facilities in Viet Nam, Thailand, India and Malaysia to spread risk. U.S. import data show that a substantial portion of the market share lost by China has been captured by other Asian suppliers and North American partners, including Viet Nam.
At the same time, FDI into Viet Nam has rebounded strongly in recent years, with newly registered capital concentrated mainly in manufacturing. Investors continue to regard Viet Nam as a production base serving global markets, particularly as the country possesses an extensive FTA network, a favorable geo-economic position and a young labor force.
However, this success comes with very high trade dependence. The value of Viet Nam’s merchandise exports to the United States now accounts for a large share of total exports, equivalent to a significant portion of nominal GDP. This has supported growth in the short term but also exposes the economy to major risks if the U.S. adopts broad-based trade tightening measures, especially in fast-growing sectors such as machinery, electronics, wood products and textiles.
From a supply-chain perspective, Viet Nam is simultaneously playing two roles: a friendshoring destination for European and American corporations, and a node in regional production networks led by Asian investors (Japan, Korea, China, Taiwan). This widens opportunities but also means that Viet Nam must meet very different sets of requirements at the same time regarding environmental standards, traceability, data security and investment screening regulations.
Policy implications for Viet Nam
First, Viet Nam needs to treat the “near- and friend-shoring” of supply chains as a long-term structural trend rather than a temporary response to shocks such as COVID-19 or trade wars. This calls for a comprehensive strategy to position Viet Nam as a “trusted partner” in the friendshoring networks of both the United States and the EU: a stable legal environment, consistent implementation of FTA commitments, clear investment protection mechanisms and logistics–energy infrastructure capable of supporting large-scale, time-sensitive production chains.
Second, FDI policy should shift from the goal of “more projects, more capital” to “the right projects, the right chains”. Incentive packages should focus on sectors aligned with Viet Nam’s green and digital transition, and be tied to requirements on localizing supply chains, technology transfer and the development of domestic satellite enterprises. Merely relocating geography without upgrading domestic capabilities will significantly limit gains in resilience.
Third, in light of the tightening of environmental and labor standards in new FTAs with Europe and the United States, Viet Nam must proactively “move one step ahead” in ESG standard-setting. Experience from next-generation FTAs shows that commitments on anti-deforestation, sustainable forest management, carbon reduction and labor protection quickly become non-negotiable “floors” in trade relations with advanced economies. If sectors such as wood, agriculture, textiles and footwear do not upgrade standards in time, Viet Nam risks being excluded from certain high-value supply chains, even if it continues to enjoy tariff preferences on paper.
Fourth, to reduce the risk of over-dependence on a few markets, Viet Nam needs to deepen its diversification strategy: fully exploiting existing FTAs (EVFTA, CPTPP, UKVFTA, RCEP, etc.), while opening additional “complementary spaces” such as MERCOSUR, the EAEU, the Middle East and Africa. These markets cannot replace the United States or the EU, but they can serve as “buffer zones” that help absorb shocks when major economies tighten policy. Building links and learning from new nearshoring hubs such as Mexico, Morocco and CEE is also valuable, not only in trade but in investment cooperation, logistics and sharing experience in attracting supply chains.
Fifth, domestically, the development of logistics and energy infrastructure and the digitalization of supply-chain management must be treated as foundational conditions. A friendshoring destination is only truly attractive when firms can track shipments in real time, shorten customs clearance times, optimize inventories and connect smoothly to regional logistics centers. Solutions such as digitalizing trade documents, implementing a national single window, investing in deep-sea ports, cross-border rail links and smart warehousing systems need to be closely integrated into regional planning and industrial development strategies.
Finally, the entire process will only be meaningful if accompanied by upgrading the capabilities of Vietnamese enterprises. As global supply chains are being reconfigured, domestic firms need support to access information, receive advisory services on restructuring their supply networks, improve quality and ESG management, and connect with major buyers within nearshoring/friendshoring networks. Only then can Viet Nam move beyond being a passive “assembly platform” to become a proactive node with stronger bargaining power and a larger share of value added in reshaped global value chains.
If Viet Nam can seize the opportunities and manage risks effectively, the current wave of nearshoring and friendshoring in Europe and the United States can become a new driver of industrialization, while mitigating adverse impacts from tightening trade measures and increasingly complex geopolitical competition in the years ahead.
Việt Thành
